☆Relationship between a statement of financial position and a statement of income
　　●The balance sheets are not isolated statements, they are linked over time with the income statement
　　●As the business records a profit in the income statement, that profit is added to
　　the capital section of the balance sheet, along with any capital introduced. Cash
　　taken out of the business by the proprietor, called drawings, is deducted.
　　Illustration – the accounting equation:
　　The transactions:
　　Day 1 Avon commences business introduction $1,000 cash.
　　Day 2 Buys a motor car for $400 cash.
　　Day 3 Buys inventory for $200 cash.
　　Day 4 Sells all the goods bought on Day 3 for $300 cash.
　　Day 5 Buys inventory for $400 on credit.
　　SFP at the end of each day’s transactions:
　　Solution:
　　Day 1 Assets (Cash $1,000) = Capital ($1,000) + Liabilities ($0)
　　Day 2 Assets (Motor $400) = Capital ($1,000) + Liabilities ($0)
　　(Cash $600)
　　Day 3 Assets ( Inventory $200) = Capital($1,000) + Liabilities ($0)
　　(Motor $400)
　　(Cash $400)
　　Day 4 Assets ( Motor$ 400) = Capital　　　　 +　 Liabilities ($0)
　　(Cash $700) (Beginning$1,000)
　　(Profit $100)
　　Day 5 Assets (Inventory $ 400) = Capital　　 +　 Liabilities
　　( Motor$ 400)　 (Beginning$1,000)($400)
　　(Cash $700) 　　　(Profit $100)
　　Avon
　　Statement of Financial Position as at end of Day 5