The Statement of Financial Position

The income statement and the cash flow statement each have a chapter. This is the third primary statement — the one that shows what the business owns and owes at a single moment, rather than what happened over a period. Most of the difficulty here is classification rather than arithmetic. The chapter works through it deliberately: what a complete set of financial statements contains, then the current versus non-current decision in all the places it is genuinely hard — the operating cycle when it runs longer than a year, the current portion of a long-term loan, and a liability refinanced after the reporting date but before the accounts are signed. You then build the statement repeatedly. IFRS commonly leads with non-current assets and places equity ahead of liabilities; US GAAP leads with current assets and lists liabilities before equity, and an optional final section repeats the exercise in that order. Two harder cases follow, where inventory carried at net realisable value and assets held for sale complicate the face of the statement. It closes with the ratios that actually read the statement — working capital, the current and acid-test ratios, and gearing.