Question 2 Sba: \"Do you know something about the Statement Of Financial Position (SOFP)? Don: \"What\'s that?\" Sba: The SOFP is actually not a part of the double entry system. Don: \"Are you sure? But when I close the ledgers, its balances are all shown in the SOFP Sha: \"Yup, I am pretty sure. Did you forget that the SOFP doesn\'t have closing balances?\" Don: \"Oh yeah.... Required: Based on the above conversation, discuss on the implications in which the Statement Of Financial Position (SOFP) not being part of the double entry system. (3 marks) Solution EXPLANATION --- First of all lets discuss what is Statement of Financial position?? It is basically a statement showing the financial position of an individual or any entity or organisation at the end of end at a particular date. It is none other than BALANCE SHEET. It is made up of 3 things -- LIABILITIES , ASSETS and EQUITY. It helps stakeholders and users of financial statements to assess the financial soundness of an entity in terms of liquidity risk, financial risk, credit risk and business risk. Now lets discuss whether statement of financial position is part of double entry system or not ?? No , it is a part of double entry system as it shows the total balances of assets, liabilities and equity at a particular given date. As double entry system affects two ledgers at a single transaction so balance sheet is also dependent upon double entry book system.Therefore, Yes Balance Sheet (accounts) are also a part of the double entry system, however it is not mandatory to have a balance sheet account in each and every double entry transaction..