The statement of financial position is another term for the balance sheet. The statement lists the assets, liabilities, and equity of an organization as of the report date. The information on the statement of financial position can be used for a number of financial analyses, such as comparing debt to equity or comparing current assets to current liabilities. It is one of the financial statements, and so is commonly presented alongside the income statement and statement of cash flows.
The format of the statement of financial position follows the basic accounting equation, which states that:
Assets = Liabilities + Equity
This means that all asset line items are presented first, with a total that matches the totals for liabilities and equity, which are presented next. Common line items in the report are as follows:
Assets
- Cash
- Accounts receivable
- Inventory
- Fixed assets
- Other assets
Liabilities
- Accounts payable
- Accrued expenses
- Sales tax liability
- Income tax liability
- Debt
Equity
- Common stock
- Additional paid-in capital
- Retained earnings
The statement of financial position is most commonly issued when a business is operating under a double entry accounting system, since this approach provides for ongoing updates to asset, liability, and equity accounts. If an entity is instead using a single entry accounting system, there is no easy way to construct the statement, which is usually compiled manually.
