5.4 - statement of financial position

Question 1

what is a statement of financial position (SOFP)?

Answer 1

The SOFP shows the value of a business’ assets and liabilities at a particular time

Question 2

what are the two parts of a SOFP?

Answer 2

• assets
• liabilities

Question 3

what is an asset?

Answer 3

items of value which the business owns

Question 4

what is a non-current (fixed) asset?

Answer 4

something the business owns for more than a year e.g. buildings, machinery

Question 5

what is a current asset?

Answer 5

something the business owns for less than a year e.g. cash, accounts receivables

Question 6

what is a liability?

Answer 6

debts that the business owes

Question 7

what is a non current liability?

Answer 7

debts that don’t have to be paid back within a year e.g. mortgage, long term bank loans

Question 8

what is a current liability?

Answer 8

debts that must be paid back within a year e.g. bank overdraft, accounts payable

Question 9

what is total shareholders equity?

Answer 9

the total sum of money invested into the business by the owners of the company. It is invested into the business in two ways

Question 10

how do you calculate total shareholders equity?

Answer 10

total assets - total liabilities

Question 11

how can shareholders equity be invested?

Answer 11

1. share Capital (money put into the business by shareholders)
2. retained profit (profit reserved from the previous years profit and put back into the business)