Page 49 - Microsoft Word - 00 BA3 IW Prelims STUDENT.docx

The Regulatory Framework of Financial Reporting

We can see from the above that the statement of financial position could be used to
calculate the value of capital. We have the value of all of the assets and liabilities –
the only missing (or balancing) item is the capital balance. If this method was used
the capital value would be the figure required to make the statement of financial
position balance.

You should also note the order in which the current assets are listed. This is referred
to as the order of liquidity. Liquidity is the measure of how easily or quickly current
assets can be converted into cash, and it is usual for current assets to be listed from
the least liquid to the most liquid (as above).

43