Statement of Financial Position (Balance Sheet)

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.

Vertical Format

Balance Sheet - Vertical Format

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

  1. Edited grammatical errors.
  2. Changed ‘Balance Sheet’ to ‘Statement of Financial Position’.
  3. Changed ‘stock’ to ‘inventory’.
  4. Changed ‘debtors’ to ‘trade receivables’.
  5. Changed ‘creditors’ to ‘trade payables’.
  6. Revised the format of Statement of Financial Position to GCSE ‘O’ Level Examination standard.
  7. Removed Horizontal Format style of Statement of Financial Position. (Please learn vertical format instead).