Statement of Financial Position (SoFP for short)
SoFP is simply the result of an accounting equation.
Assets = Capital + Liabilities (Please compare this with SOFP’s format below later!)
Before we look at the format, some slight explanations on the definitions of Assets and Liabilities are as follow:
There are two headings under assets; Fixed Assets and Current Assets.
Fixed Assets are usually long life, are used in the business and are not for resale purposes. Examples: land and buildings, fixtures and fittings, machinery, and motor vehicles.
Current Assets are items that are easily convertible into cash. Examples: cash in hand, cash at bank, stock, and debtors
There are also two headings under liabilities; Current Liabilities and Long term Liabilities.
Current Liabilities – payments that need to be made to creditors within a one year period
Long term Liabilities – payments that need to be made to creditors over a one year period.
Going back to the accounting equation earlier:
Fixed Assets + Current Assets = Capital + Current Liabilities + Long Term Liabilities
12,000 + 9,200 = 19,200 + 2,000 + 0
21,200 (Assets) = 21,200 (Capital + Liabilities)
Is the format still hard? Clearly not because you can derive the format from the accounting equation! Easy right?
Updated on 14/11/2017
- Edited grammatical errors.
- Changed ‘Balance Sheet’ to ‘Statement of Financial Position’.
- Changed ‘stock’ to ‘inventory’.
- Changed ‘debtors’ to ‘trade receivables’.
- Changed ‘creditors’ to ‘trade payables’.
- Revised the format of Statement of Financial Position to GCSE ‘O’ Level Examination standard.
- Removed Horizontal Format style of Statement of Financial Position. (Please learn vertical format instead).