What would have been the effect on the statement of financial position if the inventories had been sold on 7 March for £2,500 rather than £7,000?

The statement of financial position on 7 March would then have been:

Delta Supplies Statement of financial position as at 7 March

ASSETS	£
Cash at bank (23,000 + 2,500)	25,500
Machinery	10,000
Inventories (7,000 – 7,000)	–
Total assets	35,500

EQUITY AND LIABILITIES	£
Equity (20,000 + (2,500 – 7,000))	15,500
Liabilities – borrowing	12,000
Liabilities – trade payable	8,000
Total equity and liabilities	35,500

As we can see, the inventories (£7,000) will disappear from the statement of financial position, but the cash at bank will rise by only £2,500. This will mean a net reduction in assets of £4,500. This reduction represents a loss arising from trading and will be reflected in a reduction in the equity of the owners.