Classifying assets and liabilities and preparing a balance sheet that reflects the accounting equation.
The statement of financial position (balance sheet) shows what a business owns and owes at one point in time.
Classifying items
- Non-current assets: kept long-term (premises, machinery, vehicles).
- Current assets: short-term (inventory, trade receivables, cash).
- Current liabilities: due within a year (trade payables, overdraft).
- Non-current liabilities: due after a year (long-term loans).
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