Prepare a sole-trader statement of financial position
Classify and present assets, liabilities and capital on a specified date, then check the accounting equation.
Cambridge IGCSE Accounting 0452 / (9–1) 0985, 2027–2029 Version 1. These lessons follow the 2027–2029 syllabus only; the separate 2026 syllabus update is not yet mapped. Written practice is self-checked, not an official Cambridge grade. Full timed-paper practice and human subject-teacher review remain pending.
Before you begin
- No previous accounting study is assumed. Keep the business, transaction and accounting period in view, and distinguish a resource, a claim and a performance result.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
A supplier balance is unpaid at year-end. Which class is it normally in?
What you will learn
- Explain the importance of a statement of financial position at a specified date
- Classify non-current assets, intangible assets, current assets, current liabilities, non-current liabilities and capital
- Prepare a sole-trader statement of financial position and calculate closing capital
Present resources and claims at a date
A statement of financial position shows the business's assets, liabilities and owner's equity on a specified date. Present non-current assets and current assets separately, then current and non-current liabilities and capital in an appropriate format.
Examples include equipment and intangible assets as non-current assets; inventory, receivables and bank as current assets; payables and accruals as current liabilities; and a long-term loan as a non-current liability when it is due beyond the next operating year.
Check the capital figure and follow linked balances
Assets = liabilities + owner's equity. If opening capital is given, closing capital is adjusted for additional capital, profit and drawings. If the other balances are given, closing capital is the residual: total assets less total liabilities.
Net book value is used for non-current assets when accumulated depreciation is supplied. Trade receivables are presented after confirmed write-offs and any allowance; closing inventory uses the correct valuation.
A change to one account can affect other statement balances: depreciation reduces profit and carrying value; writing off a debt reduces both profit and receivables; drawings reduce capital but are not expenses. Recheck both statements after each adjustment.
Pause and explain
Total assets are $31,500 and total liabilities are $9,200. Find closing capital.
Worked example
A sole trader has equipment at net book value $24,000, an intangible asset $2,000, inventory $8,500, receivables $6,300 and bank $1,200. Payables are $5,300, accrued expenses $700 and a long-term loan $12,000. Find closing capital and classify the balances.
Show the worked solution
- Non-current assets = 24,000 + 2,000 = $26,000; current assets = 8,500 + 6,300 + 1,200 = $16,000.
- Total assets = $42,000. Current liabilities = 5,300 + 700 = $6,000; non-current liability = $12,000.
- Closing capital = 42,000 − 6,000 − 12,000 = $24,000.
Answer Non-current assets $26,000; current assets $16,000; current liabilities $6,000; non-current loan $12,000; closing capital $24,000.
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Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
Classify plant at net book value $18,000, inventory $4,200, receivables $3,100, bank overdraft $700, trade payables $2,400 and a four-year loan $8,000. Find closing capital.
Give me a hint
Separate non-current and current items, then subtract all liabilities from assets.
Compare my reasoning
- Non-current assets: plant $18,000; current assets: inventory plus receivables = $7,300.
- Current liabilities: overdraft $700 and payables $2,400; non-current liability: loan $8,000.
- Capital = assets 25,300 − liabilities 11,100 = $14,200.
Non-current assets $18,000; current assets $7,300; current liabilities $3,100; non-current loan $8,000; capital $14,200.
Look for these in your work
- Classification correct
- Liabilities total correct
- Capital balances
Opening capital is $20,000, profit is $6,500, additional capital is $2,000 and drawings are $3,200. Calculate closing capital and explain where it appears.
Give me a hint
Add capital and profit, then deduct drawings.
Compare my reasoning
- Closing capital = 20,000 + 6,500 + 2,000 − 3,200.
- Closing capital = $25,300.
- It is the owner's equity at the statement date, not a separate asset or bank balance.
Closing capital is $25,300 and appears as owner's equity in the statement of financial position.
Look for these in your work
- Formula correct
- Calculation correct
- Equity distinguished
A statement balances only after inventory is entered at $7,800, but lower of cost and NRV is $7,250. Explain what must change before the statement is accepted.
Give me a hint
Correct the inventory amount first; do not force the equation with an unexplained balancing figure.
Compare my reasoning
- Reduce inventory by $550 to the required lower-of-cost-and-NRV amount.
- This also reduces current assets and, before tax or other adjustments, profit and closing capital by $550.
- Recalculate the statement totals and verify assets equal liabilities plus capital.
Use inventory $7,250. The $550 write-down reduces current assets and profit/capital before other adjustments; recalculate and check the equation rather than inserting a balancing figure.
Look for these in your work
- Valuation corrected
- Equity effect explained
- Equation check stated
Common mistakes
- Showing an asset at cost when net book value is required
- Classifying a long-term loan as current without checking repayment timing
- Showing a creditor balance as an asset
- Treating capital as a cash balance
What can you explain now?
Where is inventory classified in the statement of financial position?
Compare with the explanation
Current assets
Inventory is held for sale or use in the operating cycle.
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Make it stick
What does a statement of financial position report, and at what time scale?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.