What would have been the effect on the statement of financial position if the inventories had been sold on 7 March for £4,500 rather than £8,000?

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

Zeta Enterprises Statement of financial position as at 7 March

ASSETS	£
Cash at bank (25,000 + 4,500)	29,500
Equipment	12,000
Inventories (8,000 – 8,000)	–
Total assets	41,500

EQUITY AND LIABILITIES	£
Equity (22,000 + (4,500 – 8,000))	18,500
Liabilities – borrowing	15,000
Liabilities – trade payable	8,000
Total equity and liabilities	41,500

As we can see, the inventories (£8,000) will disappear from the statement of financial position, but the cash at bank will rise by only £4,500. This will mean a net reduction in assets of £3,500. This reduction represents a loss arising from trading and will be reflected in a reduction in the equity of the owners.