Statement of financial position
The statement of financial position also called the balance sheet; It is a statement that contributes to clarifying the financial position of the company during a certain date, often at the end of the accounting period, and the statement of financial position helps to clarify the nature of the assets owned by the company, the obligations arising from them, and the amount of money remaining after paying the value of the obligations. It is defined The statement of financial position is a financial statement that summarizes all the assets, liabilities, and shareholders’ rights of an entity during a specific period of time, and these three components contribute to clarifying the nature of the entity’s properties, and the amounts that are invested in its various operations. Other definitions of the statement of financial position are a statement It shows the financial position of the business, including assets, liabilities, and equity at a point in time; That is, it shows the net worth of the business, and it is one of the main financial statements used in the business sector.
Components of the statement of financial position
The statement of financial position contains a group of components that make up the financial statements contained therein. The following is information about these components:
assets
Assetsare the total assets of the company, and are the first component of the statement of financial position, and are divided into the following:
Current assets: They are assets that can become money, and are characterized by the ability to consume or sell them, and include a group of types:
Money: It is the cash that belongs to the company in its bank account, and the money is included in the statement of financial position based on its market value.
Securities: They are short-term investments, and they constitute a group of securities such as bonds and shares that are present in the financial market.
Accounts receivable: the amounts of money owed to the company from the services and goods that it provides to customers based on credit; Accounts receivable are all services and products for which customers have not paid for the company.
Inventory: It is all materials available for sale or that are being prepared for sale, and it is possible to evaluate this stock; By relying on the application of various methods that help in calculating the current market cost, the most important of which are: first in first out, last in first out, and the average cost method.
Prepaid expenses: are amounts of money paid for services that are within the company's future expectations; It is expected to be obtained in the future, the most important of which are rents and insurance premiums.
Long-term assets: They are the second type of assets that are not often shown in the company's balance sheet. Therefore, all assets that are not classified under current assets are considered long-term assets, and include the following types:
Investments: They are the company’s investments that are expected to be sold within a year, and include common and long-term securities, and unused fixed assets such as land.
Fixed assets: They are assets that have characteristics that contribute to their survival for more than one year, such as equipment, land, and buildings used by the company.
Other Assets: These are assets that cannot be included in any of the asset classes, such as deferred expenses and receivables.
Intangible assets: They are assets that lack a physical component, but contribute to providing all economic characteristics. Examples of intangible assets are copyright, trademark, goodwill, and others.