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What is the difference between budget and statement of financial position?
The balance sheet list provides important information about the financial position of the company, which is monitored by many parties such as management, shareholders and investors in the company to make important decisions related to the company and to monitor its financial position, in addition to creditors and investors who seek to provide financing or investment in this company and government agencies such as the Ministry This list also provides information on the extent of the company’s independence and the soundness of its financial position. The company’s performance is evaluated through the data contained therein that relate to the company’s assets, obligations and ownership rights through certain financial ratios based on the numbers that appear in this list.But there is another list called the list of financial position and it has a similar importance to the importance of the balance sheet and many consider it names for one term, despite the presence of some differences between them that explain the difference between them and this is what will be discussed in this article.
The difference between the balance sheet statement and the statement of financial position
Both the balance sheet and the statement of financial position provide an overview of the company’s financial position. They are very similar in this respect, and on the other hand, there are a good number of important differences that differentiate between the balance sheet and the statement of financial position, and the most important differences will be clarified between Both lists are as follows:
In terms of goals
The main objective of the balance sheet statement is to identify the company's assets and liabilities; That is, its obligations and ownership rights, but the statement of financial position has a more comprehensive goal, which is to reveal the general financial health of the company, and to add more data that clarify a more comprehensive idea of the financial conditions, while the balance sheet list gives preliminary data on the financial position of the company.
In terms of content
The balance sheet contains less financial data than the statements in the statement of financial position, and each of the following information is included in it:
Assets: Any assets held by the company, including cash and cash equivalents, inventory and receivables of the company, and any prepaid expenses are included in addition to the investments made by the company.
Liabilities: These include loans and expenses payable in addition to debts and income taxes.
Shareholder's equity: It is the result of subtracting the obligations from the assets and expresses the residual value of the shareholders if the company has paid all its debts, and it is divided into share capital and retained earnings.
As we mentioned earlier, the statement of financial position is more comprehensive, as it includes all of what is mentioned in the balance sheet, in addition to the following:
Income statement: It shows all the revenues, costs and expenses incurred during the financial period.
Cash flow statement: This list shows the cash and cash equivalents entering and leaving the company.
In terms of menu size
Since the balance sheet is only a section of the statement of financial position, it is necessarily considered smaller in size than the latter, as it contains less information and therefore takes less time to prepare and evaluate.
In terms of construction
The time of creation of the balance sheet list differs from the statement of financial position; Where the balance sheet list precedes the statement of financial position, because the statement of financial position is the last stage in the financial reporting process because it includes all the financial information in the company. It includes the balance sheet list in addition to other financial statements, and it is also possible to create a balance sheet list without a list The financial position, but the statement of financial position cannot be created without the creation of the balance sheet.
In terms of publication
Companies usually publish the list of financial position so that stakeholders can track the financial performance, as it is important for transparency and building confidence in the company, while the balance sheet list is evaluated internally and is rarely presented as a separate list.
In terms of comprehensiveness
The term statement of financial position is a more general and comprehensive term than the balance sheet because it refers to the entire financial report or any part of it, while the term balance sheet is more specific and precise because every balance sheet includes the same contents and objectives.
Other differences between the balance sheet statement and the statement of financial position
Here are some other differences between the two lists:
The balance sheet is generally created by for-profit companies, while the statement of financial position is prepared by non-profit organizations.
In the balance sheet, both sides of the total assets, total liabilities and capital are equal, and the capital represents the difference between assets and liabilities, while this is not a main condition in the statement of financial position if it is for a profit-making institution, as it does not contain the capital, as it has no equity for shareholders.
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