Chapter 5

Main financial statements: The statement of financial position (balance sheet)

‘Creative accounting practices gave rise to the quip, “A balance sheet is very much like a bikini bathing suit. What it reveals is interesting, what it conceals is vital.”’

Abraham Briloff, Unaccountable Accounting, Harper & Row (1972). The Wiley Book of Business Quotations (1998), p. 351


Learning Outcomes

After completing this chapter you should be able to:

  • Explain the nature of a statement of financial position.
  • Understand the individual components of a statement of financial position.
  • Outline the layout of a statement of financial position.
  • Evaluate the usefulness of a statement of financial position.

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Chapter Summary

  • One of three main financial statements.
  • Consists of assets, liabilities and equity.
  • Assets are most often non-current (e.g., property, plant and equipment such as land and buildings, plant and machinery, motor vehicles, and fixtures and fittings) or current (e.g., inventory, trade receivables, cash).
  • Liabilities can be current (e.g., trade payables, short-term loans) or non-current (e.g., long-term loans).
  • Listed companies have a special terminology and presentational format for ...

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