Statement of Affairs and Balance Sheet.
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Detailed Solution & Explanation
Difference between Statement of Affairs and Balance Sheet
Statement of Affairs
Balance Sheet
It is prepared on the basis of trans- actions
recorded partly under the double entry
system of book-keeping and partly under
the single-entry system. Most of the
financial items are recorded based on the
information gathered from memory rather
than from records.
It is based on transactions recorded strictly
on the double entry system of bookkeeping.
Each & every financial item appearing in
the balance sheet can be verified from the
relevant records (subsidiary books &
ledger) and other documentary evidences.
Capital is merely a balancing figure in the
statement of affairs and is the excess of
assets over liabilities. Hence assets need not
be equal to liabilities.
Capital as appearing in the Balance Sheet, is
derived from the balance of the capital
account in the ledger and therefore the total
of assets is always equal to the total of
liabilities.
Statement of Affairs is prepared from
incomplete records, and therefore it is very
difficult, to identify and record those assets
and liabilities, if omitted from the books of
account.
Since all items are properly recor- ded,
there is no possibility of omis- sion of any
item of asset and liability. Further, locating
the missing items is easy since the balance
sheet will not tally.
Statement of Affairs is prepared with the
objective to identify the capital figure in the
beginning and at the end of the accounting
period respectively.
Balance Sheet is prepared with the objective
of ascertaining the financial position of the
entity on a particular date.
About This Chapter: Final Accounts
Paper
Paper 1: Accounting
Weightage
25-30%
Key Topics
Sole Proprietor, NPO, Manufacturing
This chapter covers Sole Proprietor, NPO, Manufacturing and is part of Paper 1: Accounting in the CA Foundation exam.
View Official ICAI SyllabusExam Strategy Tip
This topic carries 25-30% weightage. Focus on understanding core concepts rather than memorizing.
Key Concepts to Understand
Related Comparison Tables
More Questions from Accounts from Incomplete Records
From the following income and expenditure account of a Club for the year-ending 31 March, 2024, you are required to prepare receipt and payment account for the year ending 31 March, 2024 and Balance Sheet as on 1 April, 2023. INCOME AND EXPENDITURE ACCOUNT For the year ending 31st March, 2024 Expenditure Amount Income Amount To Lawn Maintenance To General Expenses To Stationery (depreciation) To Depreciation on Sports Material To Honorarium To excess of income over expenditure 42,000 13,000 1,500 22,000 10,400 44,500 By Subscription By Admission Fees By Sports Material (sale of 2nd Hand Material) By Entertainment 1,05,000 12,000 2,400 14,000 1,33,400 1,33,400 Additional information 1/04/2023 31/03/2024 Cash at bank 60,000 - Stock of sports material 30,000 - Tournament Fund (after deducting tournament expenses of 14,000) - 6,000 Donations for club Building - 1,40,000 Subscription Due 10,000 15,000 Stationery Stock 4,000 - Stationery was depreciated by 25% and Sports material by 50%, [Jan. 2025, 10 Marks]
Statement of Affairs and Balance Sheet.
Single Entry System & Double Entry System
In net worth method profit or loss of the business is calculated by preparing trading and profit & loss account.
As per Companies Act, 2013, a company may prepare its records under single entry system.
Closing Capital means Opening Capital + Additional Capital + Drawings Profit.
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