Content Standard 7.2

Statement of Financial Position

Penyata Kedudukan Kewangan

One-hour paid trial · Same-day reply · from RM50/hr

Explanation

The Statement of Financial Position (Penyata Kedudukan Kewangan) shows the financial position of a sole proprietorship business on a specific date, usually at the end of the accounting period. Its main purpose is to display the total assets owned, the liabilities owed, and the owner's equity in the business. Unlike the Income Statement (Penyata Pendapatan), which covers a period of time ('for the year ended'), the Statement of Financial Position reflects the position on a single date (for example, 'as at 31 December'). It is prepared based on the accounting equation: Assets = Owner's Equity + Liabilities.

The items in this statement are classified into three main groups. Assets are divided into Non-current Assets (Aset Bukan Semasa) such as Land and Buildings (Tanah dan Bangunan), Vehicles (Kenderaan), Fittings (Lengkapan), Furniture (Perabot) and Office Equipment (Alatan Pejabat) which are used for more than one accounting period, and Current Assets (Aset Semasa) such as closing Inventory (Inventori), Accounts Receivable (Akaun Belum Terima), Bank and Cash (Tunai) which are easily converted to cash in the short term. Liabilities are split into Non-current Liabilities (Liabiliti Bukan Semasa) such as long-term Bank Loans (Pinjaman Bank) and Mortgages (Gadai Janji), and Current Liabilities (Liabiliti Semasa) such as Accounts Payable (Akaun Belum Bayar) and Bank Overdraft (Overdraf Bank). Owner's Equity is shown as the owner's closing capital.

The Owner's Equity section requires the calculation of the Capital Account (Akaun Modal), which involves three elements: opening capital, net profit (or net loss) from the Income Statement, and drawings by the owner. Closing capital is calculated using the formula: Closing Capital = Opening Capital + Net Profit - Drawings. If the business makes a loss, the net loss is deducted from the opening capital. Net profit increases capital because it belongs to the owner, while drawings (whether cash, stock or other assets taken for personal use) reduce capital because they are not a business expense but a withdrawal of the owner's stake.

The Statement of Financial Position can be prepared in two formats: the T-form (bentuk T) and the statement (vertical) format. In the T-form, assets are listed on one side while Owner's Equity and Liabilities are on the other side, and both totals must be equal. In the statement format (which is more commonly used now), the items are arranged vertically starting with Non-current Assets, followed by Current Assets to obtain Total Assets, then Owner's Equity followed by Non-current Liabilities and Current Liabilities to obtain Total Equity and Liabilities. Both formats are prepared using the balances in the Trial Balance (Imbangan Duga) after revenue and expense items have been transferred to the Income Statement.

All items remaining in the Trial Balance after preparing the Income Statement (that is, assets, liabilities, capital and drawings) are carried to the Statement of Financial Position. Debit balances in the Trial Balance (such as assets and drawings) become assets or deductions from capital, while credit balances (such as capital and liabilities) become equity or liabilities. The accuracy of this statement is confirmed when Total Assets equals Total Owner's Equity and Liabilities. If the two sides do not balance, it indicates an error in the entries or calculations that needs to be rechecked.

Worked examples

Example 1: Calculating Closing Capital in the Capital Account

Perniagaan Maju Jaya, owned by Encik Faizal, has the following information as at 31 December 2024: Opening capital RM50,000; Net profit (from the Income Statement) RM15,000; Drawings RM6,000.

Closing capital calculation: Closing Capital = Opening Capital + Net Profit - Drawings = RM50,000 + RM15,000 - RM6,000 = RM59,000.

Arrangement in the Owner's Equity section: Capital (opening) RM50,000; Add: Net profit RM15,000, giving RM65,000; Less: Drawings RM6,000; equals Closing capital RM59,000. Note: if a net loss occurs, it is deducted (not added).

Example 2: Statement of Financial Position (Statement Format)

Using the balances from the Trial Balance of Perniagaan Maju Jaya as at 31 December 2024 after the Income Statement is prepared:

Non-current Assets: Vehicles RM30,000; Fittings RM10,000; total RM40,000.

Current Assets: Closing Inventory RM8,000; Accounts Receivable RM5,000; Bank RM12,000; Cash RM2,000; total RM27,000. Total Assets = RM40,000 + RM27,000 = RM67,000.

Owner's Equity: Closing capital RM59,000. Non-current Liabilities: Bank Loan RM5,000. Current Liabilities: Accounts Payable RM3,000. Total Equity and Liabilities = RM59,000 + RM5,000 + RM3,000 = RM67,000.

Both totals are equal (RM67,000 = RM67,000), so the statement is balanced and accurate.

Example 3: T-Form

In the T-form for Perniagaan Maju Jaya, the left side lists the Assets: Vehicles RM30,000; Fittings RM10,000; Inventory RM8,000; Accounts Receivable RM5,000; Bank RM12,000; Cash RM2,000, total RM67,000.

The right side lists Owner's Equity and Liabilities: Closing capital RM59,000; Bank Loan RM5,000; Accounts Payable RM3,000, total RM67,000.

Both sides total the same amount, RM67,000, confirming the accounting equation Assets = Owner's Equity + Liabilities.

Practice

Perniagaan Sinar Baiduri has the following information: Opening capital RM80,000, Net profit RM22,000, Drawings RM10,000. Calculate the closing capital and show its arrangement in the Owner's Equity section.

Answer: Closing capital = Opening capital + Net profit - Drawings = RM80,000 + RM22,000 - RM10,000 = RM92,000. Arrangement: Capital RM80,000; Add: Net profit RM22,000 = RM102,000; Less: Drawings RM10,000; Closing capital RM92,000.

The following are balances of Perniagaan Teguh Setia as at 31 December 2024: Furniture RM25,000, Inventory RM6,000, Bank RM9,000, Accounts Receivable RM4,000, Closing capital RM38,000, Accounts Payable RM6,000. Prepare the Statement of Financial Position in statement format and confirm it balances.

Answer: Non-current Assets: Furniture RM25,000. Current Assets: Inventory RM6,000 + Accounts Receivable RM4,000 + Bank RM9,000 = RM19,000. Total Assets = RM25,000 + RM19,000 = RM44,000. Owner's Equity: Closing capital RM38,000. Current Liabilities: Accounts Payable RM6,000. Total Equity and Liabilities = RM38,000 + RM6,000 = RM44,000. Both totals are equal (RM44,000), so the statement balances.

Perniagaan Aman Damai made a net loss of RM5,000. Opening capital is RM60,000 and drawings RM8,000. Calculate the closing capital.

Answer: When a net loss occurs, it is deducted from capital. Closing capital = Opening capital - Net loss - Drawings = RM60,000 - RM5,000 - RM8,000 = RM47,000.

State the correct classification (Non-current Asset, Current Asset, Non-current Liability or Current Liability) for the following items: (i) Vehicles (ii) Bank Overdraft (iii) Closing Inventory (iv) 5-year Bank Loan.

Answer: (i) Vehicles: Non-current Asset. (ii) Bank Overdraft: Current Liability. (iii) Closing Inventory: Current Asset. (iv) 5-year Bank Loan: Non-current Liability.

Exam tips

Key terms

Statement of Financial Position: A statement showing the assets, liabilities and owner's equity of a business on a specific date.
Owner's Equity: The owner's interest or stake in the business, shown as closing capital (opening capital plus net profit less drawings).
Drawings: Money, stock or other assets taken by the owner for personal use; it reduces capital.
Non-current Assets: Assets owned and used for more than one accounting period, such as vehicles and fittings.

Source: DSKP KSSM Prinsip Perakaunan Tingkatan 4

Need help with Statement of Financial Position?