Blog entry by Orji Anyianuka
The Statement of Financial Position (also called the Balance Sheet) reports, at a point in time, the company’s Assets and the sources of the assets financing, namely Owners Equity and Liability.
The Accounting Equation expresses the relationship among the Assets, Share Holders Equity and Liability as follows: A=L+OE.
As stated, the Statement of Financial Position and the Statement of Profit or Loss. The Owners Equity increases or reduces depending on if a company made a Profit or Loss in a given accounting period.
The Statement of Financial Position shows how geared a company is and depending on the peculiarities of the industry the company lenders and investors will be able to assess the suitability of its gearing situation.