4 STATEMENT OF FINANCIAL POSITION

INTRODUCTION

The statement of financial position (sometimes called the balance sheet) is a statement that presents an entity’s assets, liabilities and equity (net assets) at a given point in time (i.e., as at a specific date). During the early era of financial reporting standard setting, throughout the nineteenth century and first half of the twentieth century, the emphasis of legislation was almost entirely on the statement of financial position but by the mid-twentieth century owners were asking for more and more information about operating performance, leading to presentations of an increasingly complex income statement (sometimes called the profit and loss account).

There is a continuing tension between the two financial statements, since—because of double entry bookkeeping conventions—they are linked together and cannot easily serve differing objectives. The stock markets look primarily at earnings expectations, which are largely based on historic performance, as measured by the income statement. ...

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