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Statement of Financial Position

Writer's picture: Pramela NairPramela Nair

Updated: Jul 30, 2024

Financial statements provide an overview of a company's financial health. The three main types of financial statements are the statement of financial position, the income statement, and the cash flow statement. This blog will focus on the statement of financial position.




To understand the statement of financial position let us take an example of a fictitious company, ‘ABC Industries’.


Consolidated Statement of Financial Position

(in thousands of Dollars)


Figure 1: Consolidate Statement of Financial Position of ABC Industries




The statement of financial position typically includes information for both the current financial year and the previous financial year. A financial year usually spans one year and can begin in any month based on the company's incorporation. For instance, in the case of ABC Industries, the year ends in May, meaning it starts from June every year.

 

The statement of financial position shows the balance between the assets and the liabilities & equity taken together.


Refer to the blog ‘Basics of Assets, Liabilities, and Equity’ for a better understanding of the terms.




From Figure 1, we can see that for ABC Industries, for the year 2024:

Total Assets = $2,641,000

Total Liabilities = $1,570,000

Total Equity = $1,071,000

$2,641,000 = $1,570,000 + $1,071,000








Disclaimer: The description above is written by the author based on the knowledge attained from years of reading and teaching experience from various books and articles.



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