The structure of the statement of financial position is similar to the basic accounting equation. For instance, a corporation will report amounts in the following format: Assets = Liabilities + Stockholders' Equity. A nonprofit organization's format will be: Assets = Liabilities + Net Assets.
The statement of financial position must reflect the basic accounting principles and guidelines such as the cost, matching, and full disclosure principle. Accordingly, the statement of financial position is more meaningful when it is prepared under the accrual method of accounting.
Learn Accounting: Gain unlimited access to our seminar videos, flashcards, visual tutorials, exams, business forms, and more when you upgrade to PRO.