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 £6,000?

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

Nova Enterprises Statement of financial position as at 7 March

ASSETS	£
Cash at bank (16,000 + 2,000)	18,000
Machinery	12,000
Inventories (6,000 – 6,000)	–
Total assets	30,000

EQUITY AND LIABILITIES	£
Equity (20,000 + (2,000 – 6,000))	16,000
Liabilities – borrowing	8,000
Liabilities – trade payable	6,000
Total equity and liabilities	30,000

As we can see, the inventories (£6,000) 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 £4,000. This reduction represents a loss arising from trading and will be reflected in a reduction in the equity of the owners.