What would have been the effect on the statement of financial position if the inventories had been sold on 7 March for £2,000 rather than £5,000?

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

Theta Products Statement of financial position as at 7 March

ASSETS	£
Cash at bank (28,000 + 2,000)	30,000
Equipment	14,000
Inventories (5,000 – 5,000)	–
Total assets	44,000

EQUITY AND LIABILITIES	£
Equity (24,000 + (2,000 – 5,000))	21,000
Liabilities – borrowing	15,000
Liabilities – trade payable	8,000
Total equity and liabilities	44,000

As we can see, the inventories (£5,000) will disappear from the statement of financial position, but the cash at bank will rise by only £2,000. This will mean a net reduction in assets of £3,000. This reduction represents a loss arising from trading and will be reflected in a reduction in the equity of the owners.