Statement of Financial Position (Cambridge International A-Level Accounting)

Statements of financial position for partnerships

Spec point — how to prepare a statement of profit or loss, appropriation account and statement of financial position for a partnership from full or incomplete accounting records. The business may be a trading or a service business

What is the layout of the statement of financial position of a partnership?

• The statement of financial position of a partnership is the same as that of a sole trader with the exception of the capital section

  • It first states the total assets

    • Non-current assets
    • Current assets

  • And then the total capital and liabilities

    • Capital
    • Non-current liabilities
    • Current liabilities

• The capital section of the statement of financial position shows the balances of each partner from their capital accounts and current accounts separately

• If the current account has a debit balance then:

  • Put brackets around the balance on the statement of financial position
  • Treat the number like a negative number

Layout of a statement of financial position for a partnership

Do I need to show the full details for the current accounts?

• A question might ask you to show full details of the current accounts

• Start with the opening balances for each partner

  • Add the interest on capital
  • Add the salaries
  • Add the interest on loans
  • Add the profit shares
  • Less the drawings and the interest on drawings
  • Calculate the closing balances for each partner
  • Add together to give the combined balance for the current account

Layout of the capital section of the statement of financial position for partnerships showing full details of the current account

Exam Hint If the question does not ask you to provide full details, then you do not need to. However, if you do not have the current accounts, then it might be easier to show the full details anyway.

Worked Example Below is the capital and current account of Adi and Bilal at 31 December 2023. Prepare an extract of the statement of financial position at 31 December 2023 showing the capital section with full details of the current accounts.

Adi and Bilal Capital Accounts
		Adi	Bilal			Adi	Bilal
Date	Details	$	$	Date	Details	£	£
				2023 Jan 1	Balance b/d	20 000	12 000

Adi and Bilal Current Accounts
		Adi	Bilal			Adi	Bilal
Date	Details	$	$	Date	Details	$	$
2023 Dec 31	Drawings	3 000	6 000	2023 Jan 1	Balance b/d	5 000	1 000
Dec 31	Interest on drawings	300	600	Dec 31	Interest on capital	1 000	600
				Dec 31	Salaries	2 000
				Dec 31	Profit share	6 000	4 000

Answer:

• Enter the details into the layout for the statement of financial position

• You get a negative value when you subtract the drawings and interest on drawings for Bilal

  • You need to use brackets.

Final answer: Adi and Bilal Final answer: Statement of Financial Position (extract) at 31 December 2023
	Final answer: $**	Final answer: $	Final answer: $
Final answer: Capital	Final answer: Adi	Final answer: Bilal	Final answer: Total
Final answer: Capital accounts	Final answer: 20 000	Final answer:** 12 000 **	Final answer: 32 000
Final answer: Current accounts
Final answer: Opening balance	Final answer:** 5 000 **	Final answer:** 1 000 **	Final answer: 6 000
Final answer: Interest on capital	Final answer:** 1 000 **	Final answer:** 600	Final answer: 1 600
Final answer: Partner's salary	Final answer: 2 000	-	Final answer: 2 000
Final answer: Profit share	Final answer: 6 000	Final answer: 4 000	Final answer: 10 000
	Final answer: 14 000	Final answer: 5 600	Final answer: 19 600
Final answer: Less: Drawings	Final answer: (3 000)	Final answer: (6 000)	Final answer: (9 000)
Final answer: Less: Interest on drawings	Final answer: (300)	Final answer: (600)	Final answer: (900)
	Final answer: 10 700	Final answer: (1 000)	Final answer: 9 700
Final answer: Total capital	Final answer: 30 700	Final answer: 11 000	Final answer: 41 700