A
statement of financial position was, before now, called the balance sheet. It
is a statement that shows the financial position of a business firm at a given
point in time. It shows the list of assets and liabilities of the business firm
arranged in such a way that the total of all assets will equal the total of all
liabilities. This means that the statement of financial position is based on
the accounting equation.
The
statement of financial position takes into consideration the end-result of the
income statement (profit or loss account) as net profit (profit after tax)
forms part of the liabilities that have to be appropriated to those who have proprietary
interest in the business entity.
Take
note that the statement of financial position is not an account in itself. For
this, it does not have the debit and credit sides (even in the T-form).
The following video demonstrates the balance sheet
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