Statement of financial position of a sole proprietor
The statement of financial position lists assets, liabilities and owner's equity at one date. Total assets must equal equity plus liabilities.
Layout
The statement of financial position (formerly the balance sheet) shows what the business owns and owes at the end of the period. Assets are split into non-current (used for more than a year: land, buildings, vehicles, fittings) and current (cash, or expected to become cash within a year: inventory, receivables, prepayments). Liabilities are split the same way. The capital section shows opening capital, plus profit, minus drawings. The adjustments appear here too: closing inventory, prepayments, accruals, accumulated depreciation and the allowance for doubtful debts.
Statement of financial position of Ruwani Fashions at 31 March 2026 (Rs.)
| Item | Rs. | Rs. |
|---|---|---|
| Non-current assets | ||
| Shop fittings: 1,500,000 − (300,000 + 150,000) | 1,050,000 | |
| Motor van: 2,400,000 − (480,000 + 384,000) | 1,536,000 | |
| Total non-current assets | 2,586,000 | |
| Current assets | ||
| Inventory | 510,000 | |
| Trade receivables 380,000 − allowance 19,000 | 361,000 | |
| Prepaid rent | 30,000 | |
| Cash at bank | 265,000 | |
| Cash in hand | 25,000 | |
| Total current assets | 1,191,000 | |
| Total assets | 3,777,000 | |
| Owner's equity | ||
| Capital 1 April 2025 | 2,200,000 | |
| Add: profit for the year | 686,000 | |
| Less: drawings (300,000 + 25,000) | (325,000) | |
| Capital 31 March 2026 | 2,561,000 | |
| Non-current liabilities | ||
| Bank loan | 800,000 | |
| Current liabilities | ||
| Trade payables | 310,000 | |
| Accrued electricity | 10,000 | |
| Accrued loan interest | 96,000 | |
| Total current liabilities | 416,000 | |
| Total equity and liabilities | 3,777,000 |
Worked example: prove that the statement balances
Using the profit of Rs. 686,000 from the income statement of Ruwani Fashions, prove that the statement of financial position balances.
- Non-current assets: 1,050,000 + 1,536,000 = 2,586,000.
- Current assets: 510,000 + 361,000 + 30,000 + 265,000 + 25,000 = 1,191,000.
- Total assets: 2,586,000 + 1,191,000 = 3,777,000.
- Closing capital: 2,200,000 + 686,000 − 325,000 = 2,561,000.
- Liabilities: 800,000 + (310,000 + 10,000 + 96,000) = 800,000 + 416,000 = 1,216,000.
- Equity + liabilities: 2,561,000 + 1,216,000 = 3,777,000.
Both sides total Rs. 3,777,000, so the statement balances.
Each adjustment touches both statements
If the statement does not balance, check that every adjustment was entered twice, once in each statement.
Order of items (common practice)
- Non-current assets first, then current assets: inventory, receivables, prepayments, cash.
- Equity next, then non-current liabilities, then current liabilities.
- Show cost, accumulated depreciation and carrying amount for each non-current asset.
- A loan repayable after 12 months is non-current; any part due within 12 months is current.
Sri Lankan banks study a borrower's statement of financial position closely: the size of the owner's equity, the loans already taken and the current assets available to repay short-term debts.
Short answer: “Distinguish current assets from non-current assets.” Current assets are cash or expected to become cash within 12 months; non-current assets are held for use for more than one year.
Essay: “From the trial balance and adjustments, prepare the statement of financial position of a sole proprietor.” Non-current assets net of depreciation, current assets with closing inventory, net receivables and prepayments, capital with profit and drawings, then liabilities with accruals; show equal totals.
Every adjustment is entered twice: once in the income statement and once in the SFP. Capital = opening + profit − drawings.