Purpose of SOFP

Question 1

What is the purpose of a Statement of Financial Position?

Answer 1

To measure Assets, Liabilities and Equity at one point in time for the (insert name of the Business here).

Question 2

What are the components for a Statement of Financial Position?

Answer 2

Components
o	Current Assets
o	Non Current Assets
o	Plant Property Equipment
o	Investments
o	Intangible 
o	Current Liabilities
o	Non Current Liabilities
o	Owners Equity

Question 3

What are the limitations of a Statement of Financial Position?

Answer 3

Assets value are recorded at Historical Cost so market valuation may have changed and the asset maybe either under or over stated.

Accumulated Depreciation and Allowance for Doubtful Debts are based on estimates

Does not show non-financial information. E.g. the quality and age of assets, the ability of staff.