Statement of Financial Position

A statement of financial position, also known as a balance sheet, is a financial statement that presents a company's financial position at a specific point in time. The statement of financial position provides an overview of a company's assets, liabilities, and equity, and is used to assess the company's financial health and ability to pay its debts.

Components of a Statement of Financial Position

A statement of financial position typically includes the following components:

• Assets: Assets are economic resources that a company owns or controls. Examples of assets include cash, investments, property, and inventory.

• Liabilities: Liabilities are obligations that a company owes to others. Examples of liabilities include loans, mortgages, and accounts payable.

• Equity: Equity represents the residual interest in the assets of a company after liabilities have been paid. Examples of equity include common stock, preferred stock, and retained earnings.

Example of a Statement of Financial Position

Here is an example of a statement of financial position for a hypothetical company called ABC Corporation:

Assume for ABC Corporation
Statement of Financial Position
As of December 31, 2023

Assets
  Cash                      $500,000
  Investments                200,000
  Property, Plant, and Equipment  1,500,000
  Inventory                  800,000
  Total Assets               $3,000,000

Liabilities
  Accounts Payable          $500,000
  Loans Payable              800,000
  Total Liabilities         $1,300,000

Equity
  Common Stock              $500,000
  Preferred Stock            300,000
  Retained Earnings          900,000
  Total Equity              $1,700,000

Total Liabilities and Equity $3,000,000

In this example, ABC Corporation has total assets of $3,000,000, total liabilities of $1,300,000, and total equity of $1,700,000. This means that the company has $3,000,000 in assets that are financed by a combination of $1,300,000 in liabilities and $1,700,000 in equity.