ACCA Applied Knowledge · Financial Accounting
Statement of Financial Position for ACCA Financial Accounting
The statement of financial position lists what a business owns (assets), what it owes (liabilities) and the owners' stake (equity) at one date. It always follows: assets = equity + liabilities. To solve questions, classify each balance as current or non-current, then check that the totals agree.
What this chapter covers
This chapter covers the statement of financial position, which shows a business's financial position at a single date. You learn the IAS 1 layout: non-current assets, current assets, equity, non-current liabilities and current liabilities. You also learn what goes into each line and how each line is measured.
The chapter builds on the accounting equation and double entry. It also links to nearly everything else in Financial Accounting. Depreciation and disposals feed non-current assets. Inventory, receivables, payables and accruals feed current items. Share issues, dividends and loans feed equity and liabilities.
The final topic brings it together. You take a trial balance, apply adjustments and build the statement. This is the skill tested in the Section B accounts preparation question. It also supports consolidation, where you combine statements of financial position. Objective test questions in Section A often test single lines, such as the carrying amount of an asset or the correct classification of a liability.
Financial Accounting is a two-hour computer-based exam out of 100 marks. Section A has 35 two-mark objective test questions and Section B has two 15-mark multi-task questions on consolidations and accounts preparation. The statement of financial position sits at the centre of both. Single-line questions in Section A are quick marks if you know the classification rules. In Section B, a correct statement depends on getting many small items right. Strong command of this chapter also makes consolidation far easier. The pass mark is 50%, so reliable marks here matter.
Statement of financial position: topics in the order to study them
- 1Format and Content of the Statement of Financial PositionStart with the layout, because every later topic is a line or section of it.
- 2Non-Current Assets in the Statement of Financial PositionNext, learn how cost, depreciation and carrying amount produce the first section of the statement.
- 3Current Assets and Current LiabilitiesThen cover inventory, receivables, cash, payables and accruals, which are the short-term items affected by period-end adjustments.
- 4Equity: Share Capital and ReservesEquity balances the statement, so study it once you know the assets and short-term liabilities.
- 5Non-Current Liabilities and Finance CostsLoans and their interest link the statement to the statement of profit or loss, and the current/non-current split needs care.
- 6Preparing the Statement from a Trial BalanceFinish by combining every topic into a full statement, which is how Section B tests the chapter.
How to prepare Statement of financial position
Work from the layout outward, then practise full preparation. Short, frequent practice suits phone study and the computer-based exam.
- Learn the IAS 1 order of headings until you can write the skeleton from memory in under a minute.
- For each topic, write down how each line is calculated, such as carrying amount = cost − accumulated depreciation.
- Do short objective questions on one topic at a time. Practise multiple choice, multiple response and number entry formats.
- Practise classification: for each item, decide current or non-current and asset, liability or equity, and say why.
- Prepare two or three full statements from trial balances. Apply adjustments in a set order and tick each trial balance line as you use it.
- Check every statement: total assets must equal equity plus liabilities. If not, hunt for a missed adjustment or a one-sided entry.
- In the last week, redo questions you got wrong and time yourself on a full preparation question.
Common mistakes in Statement of financial position
Showing non-current assets at cost instead of carrying amount
Fix: Always deduct accumulated depreciation, including the current year's charge, before writing the figure in the statement.
Putting the whole loan in non-current liabilities
Fix: Read the repayment terms. Split the loan and show each portion in the right section.
Treating share premium as part of share capital
Fix: Share capital is nominal value only. Show share premium separately under reserves.
Forgetting accruals, prepayments or the allowance for receivables
Fix: Tick off each note as you apply it. Adjust both the statement of financial position and the profit figure.
Not updating retained earnings with profit and dividends
Fix: Add profit for the year and deduct dividends declared in the year before showing closing retained earnings.
Misreading what a question asks in objective tests
Fix: Underline the item asked for, finish the full calculation, and only then compare your answer to the options.
Last-day revision: Statement of financial position
- Assets = equity + liabilities, at a single date.
- Carrying amount = cost − accumulated depreciation (and impairment, where applicable).
- Current items are those expected to be settled or realised within 12 months, or within the normal operating cycle.
- Inventory is valued at the lower of cost and net realisable value.
- Receivables are shown net of the allowance for receivables.
- Accruals are current liabilities. Prepayments are current assets.
- Share capital equals number of shares × nominal value.
- Share premium is the excess received over nominal value. It is a reserve, not share capital.
- Retained earnings = opening balance + profit for the year − dividends declared.
- A loan repayable within 12 months is a current liability. The rest stays non-current.
- Accrued loan interest is a current liability, even if the loan is non-current.
- If the statement does not balance, look for a missed adjustment before changing figures.
Statement of financial position practice questions
- At 31 March 20X6 Zenith Co had the following balances: share capital $500,000 (shares of $1 each), share premium $120,000, revaluation surpl…
- Which of the following is correctly classified as a current asset of a retailer in its statement of financial position?
- A trial balance at 31 December shows: ordinary shares $1 each, $100,000; share premium $20,000; retained earnings brought forward $35,000; r…
- At 30 June 20X7 Delta Co had the following: land and buildings at carrying amount $850,000; plant at carrying amount $320,000; development c…
- Olwen Co's equity at 1 January 20X5 was share capital $500,000 (50c shares), share premium $120,000 and retained earnings $380,000. During 2…
- At 31 March 20X6 Marlow Co has trade receivables of $84,000 before adjustment. Of these, $4,000 is to be written off as irrecoverable. An al…
- A trial balance has a suspense account debit of $3,000. It is later found that a $1,500 cash receipt from a customer was credited to receiva…
- Under IAS 1, which of the following items would be presented within current liabilities in a company's statement of financial position at 31…
Statement of financial position in other exams
The same ground in other exams, if you are preparing for more than one or want another angle on it.
Statement of financial position: frequently asked questions
What is the difference between current and non-current items?
Current assets and liabilities are expected to be realised or settled within 12 months, or within the normal operating cycle. Non-current items are longer term. The split tells users how liquid the business is.
Is the statement of financial position the same as the balance sheet?
Yes, it is the same statement. IFRS Accounting Standards use the title statement of financial position, and ACCA uses that title. You may still see balance sheet in everyday use.
Why does the statement of financial position have to balance?
Every transaction in double entry has equal debits and credits. So total assets always equal equity plus liabilities. If your statement does not balance, you have missed an entry or made an arithmetic error.
How is this chapter tested in the FA exam?
In Section A, you may get single-line questions on classification or calculation. In Section B, you may need to prepare or complete a statement of financial position from a trial balance and adjustments.
Can I study this chapter on my phone?
Yes. The layout, classification rules and formulas suit short sessions. Do full preparation questions with paper or a larger screen so you can lay out the working clearly.