Chapter 6:

BASIC OF ACCOUNTING

CLO2:
Work cooperatively in group to complete the
assigned project based on entrepreneurial
skills.
The statement of financial position is a list of all the assets
owned and the liabilities owed by a business as at a
particular date. It is a snapshot of the financial position of the
business at a particular moment.
Relationship between the Main
Financial Statements

Figure: The relationship between the statement of

financial position, the income statement and the
statement of cash flows
 The statement of financial position imitates the
combination of assets (involving cash) and claims
(involving the equity of shareholders) of the
business at a specific point in time.

The statement of cash flows and the income

statement describe the changes over a period to
two of the items in the statement of financial
position.

The statement of cash flows describes the

changes to cash. The income statement describes
changes to equity, occurring from trading
operations.
Example