What would have been the effect on the statement of financial position if the inventories had been sold on 7 March for £3,000 rather than £8,000?

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

Galactic Goods Statement of financial position as at 7 March

ASSETS	£
Cash at bank (17,000 + 3,000)	20,000
Equipment	8,000
Inventories (8,000 – 8,000)	–
Total assets	28,000

EQUITY AND LIABILITIES	£
Equity (22,000 + (3,000 – 8,000))	17,000
Liabilities – borrowing	6,000
Liabilities – trade payable	5,000
Total equity and liabilities	28,000

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 £3,000. This will mean a net reduction in assets of £5,000. This reduction represents a loss arising from trading and will be reflected in a reduction in the equity of the owners.