Page 46 - Microsoft Word - 00 BA3 IW Prelims STUDENT.docx

Chapter 2

4.3 The accounting equation and the statement of financial position

In its simplest form the statement of financial position is presented horizontally with
assets shown on the left-hand side and liabilities and capital on the right-hand side.

When we prepare a statement of financial position, assets and liabilities are divided
into two categories: non-current and current.

Non-current Current Non-current Current
assets assets liabilities liabilities
 Any tangible or  Assets which  Long-term  Those liabilities
intangible are expected liabilities which are
assets to be realised payable more payable within
acquired on a in the than 12 12 months of
long-term basis businesses months after the reporting
to be used in normal course the reporting date.
providing a of trading. date.  e.g. payables,
service to the  Disclosed in  e.g. loan. bank overdraft,
business.
the statement short-term
 Not held for of financial loan.
resale in the position with
normal course the least liquid
of trading. item first.
 e.g. land and  e.g. inventory,
buildings. receivables,
cash.

40