Statement of Financial Position (Cambridge International A-Level Accounting)

Statements of financial position for limited companies

Spec point — how to prepare a statement of profit or loss, statement of financial position and statement of changes in equity for a limited company. The business may be a trading or a service business

What is the layout of the statement of financial position of a limited company?

• The statement of financial position for limited companies is mostly the same as that of a sole trader and a partnership

  • There is no change to the non-current assets, current assets and current liabilities sections

• Any debentures are included in the non-current liabilities

• The capital section of the statement of financial position is called the equity section

• The equity section includes

  • The share capital
  • The share premium
  • The revaluation reserve
  • The general reserve
  • The retained earnings

• The information for the equity section is obtained from the statement of changes in equity

Layout of a statement of financial position for a limited company

Worked Example Abrakadabra Limited prepares its financial statements to 31 March each year.

On 31 March 2024, the following balances were provided:

	$
Inventory	7 080
Fittings at book value	140 000
Trade receivables	14 400
Other receivables	1 800
Bank	14 965
Trade payables	8 415
Other payables	6 390
4% Debentures (repayable 2034)	46 000
Share capital (ordinary shares of $0.50 each)	80 000
Retained earnings	25 800
General reserve	2 200

Additional information:

• No additional shares were issued during the year
• On 1 January 2024, dividends were paid on ordinary shares at $0.035 per share
• The profit for the year ended 31 March 2024 was $15 040

Prepare the statement of financial position at 31 March 2024 for Abrakadabra Limited.

Answer:

Calculate the cost of the dividends payment

• Calculate the number of shares

$80 000 ÷ $0.50 = 160 000 shares

• Multiply by the payment per share

160 000 × $0.035 = $5 600

Find the updated retained earnings:

• Add the profit for the year
• Subtract the dividends paid

$25 800 + $15 040 - $5 600 = $35 240

Final answer: Abrakadabra Limited Final answer: Statement of Financial Position at 31 March 2024
	Final answer: $**	Final answer: **$
Final answer: Non-current assets
Final answer: Fittings at book value		Final answer: 140 000
Final answer: Current assets
Final answer: Inventory	Final answer: 7 080
Final answer: Trade receivables	Final answer: 14 400
Final answer: Other receivables	Final answer: 1 800
Final answer: Bank	Final answer: 14 965	Final answer: 38 245
Final answer: Total assets		Final answer: 178 245
Final answer: Equity and liabilities
Final answer: Equity
Final answer: Share capital		Final answer: 80 000
Final answer: General reserve		Final answer: 2 200
Final answer: Retained earnings		Final answer: 35 240
		Final answer: 117 440
Final answer: Non-current liabilities
Final answer: 4% Debentures (repayable 2034)		Final answer: 46 000
Final answer: Current liabilities
Final answer: Trade payables	Final answer: 8 415
Final answer: Other payables	Final answer: 6 390	Final answer: 14 805
Final answer: Total equity and liabilities		Final answer: 178 245