Statement of financial position
Introduced| English | Meaning |
|---|---|
| statement of financial position/ˈsteɪtmənt ɒv faɪˈnænʃl pəˈzɪʃn/ | A financial statement showing an organisation's assets, liabilities and equity at a particular date. |
| assets/ˈæsets/ | Resources owned or controlled by a person or organisation that are expected to provide value or future benefits. |
| liabilities/ˌlaɪəˈbɪlɪtiz/ | Present obligations of a person or organisation that require future transfers of resources to settle. |
| equity/ˈekwɪti/ | The owners' residual interest in a business's assets after liabilities are deducted. |
| non-current assets/nɒn ˈkʌrənt ˈæsets/ | non-current assets |
| current assets/ˈkʌrənt ˈæsets/ | Assets expected to be used, sold or converted into cash within the normal operating cycle or a year. |
| debtors/ˈdetəz/ | debtors |
| balance sheet/ˈbæləns ʃiːt/ | A statement of an organisation's assets, liabilities and equity at a particular date. |
What the business owns and owes
- The income statement shows profit over a year; the statement of financial position 财务状况表 shows what the business owns and owes at a single moment.
- It is a snapshot of the firm's wealth.
Financial statements flow
See how business events become the statements users read.
Which is an asset?
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Assets are what the business owns; the others are liabilities.
A bank loan that the business must repay is an example of a ______.
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Liabilities are what the business owes.
Assets 资产, liabilities 负债 and equity 所有者权益
- Assets: what the business owns (buildings, machinery, stock, cash).
- Liabilities: what it owes (loans, money owed to suppliers).
- Equity: the owners' stake in the business.
The statement of financial position balances: assets equal liabilities plus equity
A business owns assets of 90 and owes liabilities of 55. What is the equity?
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Equity = assets − liabilities = 90 − 55 = 35.
Which is a current asset?
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Cash is a current asset; buildings and machinery are non-current.
Current vs non-current
- Non-current assets 非流动资产 (machines, buildings) last more than a year.
- Current assets 流动资产 (cash, stock, debtors 应收账款) are short-term.
- Liabilities split the same way: current (≤1 year) and non-current (long-term).
Worked example. A firm owns assets worth 120 and owes liabilities of 70. The owners' equity = 120 − 70 = 50 — the value belonging to the owners.
On the statement of financial position, assets are always larger than liabilities plus equity.
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False. Assets always equal liabilities plus equity; that is why it is called a balance sheet.
It always balances
- The statement always balances: assets = liabilities + equity.
- This is why it used to be called the balance sheet 资产负债表.
A balance sheet is a snapshot, not a film. It shows the position on one specific day. The very next day, as cash and stock change, the figures are already different.
You've got it
- assets = what you own; liabilities = what you owe; equity = the owners' stake
- assets and liabilities split into current (≤1 year) and non-current
- it always balances: assets = liabilities + equity (a snapshot in time)
Write from equity of 75
- Assets are 120 and liabilities are 45.
- Find equity. The statement is a snapshot of one day.
A business owns assets of 120 and owes liabilities of 45. What is the equity, and why might the same statement be out of date the next day?
Equity is assets minus liabilities. The accounting equation keeps assets equal to liabilities plus equity.
What is the equity?
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120 minus 45 is 75. Liabilities of 45 plus equity of 75 return to the assets. Other options — 35 (the lesson equity from assets of 90 and liabilities of 55); 120 (the assets).