5.4.1 The main elements of a statement of financial position

The Statement of Financial Position (also known as the Balance Sheet) provides a snapshot of a business's assets, liabilities, and equity at a specific point in time. It shows what the business owns (assets), what it owes (liabilities), and the owners' stake in the business (equity). This section focuses on the non-current assets component.

Non-Current Assets

Non-current assets are assets that a business uses for more than one accounting period. They are long-term investments that are not intended for sale in the normal course of business.

The main types of non-current assets include:

• Property, Plant, and Equipment (PP&E)
• Intangible Assets
• Financial Assets

Property, Plant, and Equipment (PP&E)

PP&E represents the physical assets a business uses to generate revenue. These assets are typically used in the production process or for providing services.

Examples of PP&E include:

• Land: The value of land owned by the business.
• Buildings: The value of buildings owned by the business, such as factories, offices, and warehouses.
• Machinery: Equipment used in the production process, such as manufacturing machines and tools.
• Vehicles: Vehicles used for business operations, such as delivery vans and company cars.
• Furniture and Fixtures: Items used in the business premises, such as desks, chairs, and shelving.

Intangible Assets

Intangible assets are assets that have no physical substance but provide future economic benefits to the business.

Examples of intangible assets include:

• Copyright: The legal right to control the use of a creative work.
• Patents: The exclusive right to make, use, and sell an invention.
• Trademarks: Symbols, designs, or names legally registered to represent a business or product.
• Goodwill: The excess of the purchase price of a business over the fair value of its identifiable net assets.

Financial Assets

Financial assets are assets that represent a claim on other entities.

Examples of financial assets include:

• Investments in other companies: Shares or other financial instruments held in other businesses.
• Debtors: Amounts owed to the business by its customers for goods or services supplied.
• Bonds: Loans made by the business to other entities.

Table Summary of Non-Current Assets

Asset Type	Description	Example
Property	Land and buildings owned by the business.	Factory building, office building, land
Plant and Equipment	Machinery, vehicles, furniture, and fixtures used in operations.	Manufacturing machine, delivery van, office desk
Intangible Assets	Assets with no physical substance but providing future benefits.	Copyright, patents, trademarks, goodwill
Financial Assets	Claims on other entities, such as debtors and investments.	Debtors account, shares in other companies

The total value of non-current assets is shown on the non-current assets side of the Statement of Financial Position. These assets are valuable to the business as they enable it to operate and generate profits over the long term.