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A4 Statement of Financial Position

A statement of financial position otherwise known as a balance sheet is a document that reports a snapshot of a firms financial position on a specific day. The document reports the assets, liabilities and capital employed of a business.

The statement can be used to analyse the performance of the business for different purposes by different stakeholders.

  • Managers may use it to check progress against targets.

  • Investors may compare statements to ones prepared on previous dates to see if the firm is increasing in value.

  • Creditors may use the statements to check the liquidity of the firm before giving credit.

Non-current assets are items owned by the business that are not easily turned into cash and therefore will not be converted into cash within an accounting year. They are used for longer-term investment into growth. Examples include property, machinery and vehicles.

Current assets are items that can or will be converted into cash within one year.

Current liabilities are debts of the business that must be paid within 12 months.

Net current assets = current assets - current liabilities (when current assets exceed current liabilities)

Non-current liabilities is the value of debts of the business that will be payable after more than one year.

Net assets are the sum of everything the business owns minus everything it owes. It is calculated by the formula;

Net assets = non-current assets + current assets - current liabilities - non-current liabilities.

Total equity is the total value of all long-term finance invested in the business

£m
ASSETS AND LIABILITIES
Non-current assets
Property, plant and equipment999.30
Intangible assets83.00
Interests in associates and other investments4.00
Defined benefit pension asset91.00
Other financial assets104.00
Deferred tax assets6.00
1,287.30
Current assets
Inventories963.70
Customer and other receivables2,233.00
Other financial assets77.00
Cash and short-term deposits124.50
3,398.20
Total assets4,685.50
Current liabilities
Bank loans and overdrafts(258.22)
Corporate bonds(443.76)
Trade payables and other liabilities(1,361.88)
Dividends payable(155.74)
Other financial liabilities(2.90)
Current tax liabilities(132.84)
(2,355.34)
Non-current liabilities
Corporate bonds(1,198.29)
Provisions(14.60)
Other financial liabilities(28.18)
Other liabilities(434.85)
Deferred tax liabilities
(1,675.92)
Total liabilities(4,031.26)
NET ASSETS654.24
TOTAL EQUITY654.24

Non-Current Assets

Non-current assets are items owned by the business that are not easily turned into cash and therefore will not be converted into cash within an accounting year. They are used for longer-term investment into growth. Examples include property, machinery and vehicles.

Tangiable assets are items that add value to a business that can be seen and touched such as buildings and machinery.

Non-tangiable assets are items on statements of financial position that add value to a business but cannot be physically touched such as goodwill and intellectual property.

Depreciation is the reduction in value of a tangible asset.

Amortisation is the reduction in value of an non-tangible asset.

£m
Non-current assets
Property, plant and equipment999.30
Intangible assets83.00
Interests in associates and other investments4.00
Defined benefit pension asset91.00
Other financial assets104.00
Deferred tax assets6.00
1,287.30

Current Assets

Current assets are items that can or will be converted into cash within one year.

Inventories are stocks of raw materials and goods that have been produced but not yet sold.

Trade receivables are amounts of money owed by customers who have bought products on credit and will pay cash at an agreed date in the future.

Prepayments are when goods and services are paid for before they are delivered.

Bank is the item on a statement of financial position that represents the cash the business holds in their bank account.

Cash is the item on a statement of financial position that represents the cash held by a business in notes and coins.

£m
Current assets
Inventories963.70
Customer and other receivables2,233.00
Other financial assets77.00
Cash and short-term deposits124.50
3,398.20

Current Liabilities

Current liabilities are debts of the business that must be paid within 12 months.

Bank overdraft is when the bank allows a business or individual to spend beyond the amount held in their account.

Accruals are items on accounting statements that represent goods and services used but will not be invoiced for until a later date.

Trade payables is the money the business owes from supplies purchased but not yet paid for.

£m
Current liabilities
Bank loans and overdrafts(258.22)
Corporate bonds(443.76)
Trade payables and other liabilities(1,361.88)
Dividends payable(155.74)
Other financial liabilities(2.90)
Current tax liabilities(132.84)
(2,355.34)

Net Assets

Net assets are the sum of everything the business owns minus everything it owes. It is calculated by the formula;

Net assets = non-current assets + current assets - current liabilities - non-current liabilities.

£m
Total assets4,685.50
Total liabilities(4,031.26)
NET ASSETS654.24

Non Current Liabilities

Non-current liabilities is the value of debts of the business that will be payable after more than one year.

Bank loan is an amount of money borrowed from a bank, usually for a stated purpose and is paid back in installments with interest

Mortgage is a long-term loan used to buy property

£m
Non-current liabilities
Corporate bonds(1,198.29)
Provisions(14.60)
Other financial liabilities(28.18)
Other liabilities(434.85)
Deferred tax liabilities
(1,675.92)

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