Distinction between Statement of Affairs and Balance Sheet:
A Balance Sheet is a statement showing assets, liabilities and equity of the company prepared on the source of the double entry system of bookkeeping. Statement of Affairs is a statement showing assets, liabilities and capital of the entity prepared on the basis of a single entry system of bookkeeping. Statement of affairs which looks like a balance sheet differs from the balance sheet in the following respects.
- Objectives: To Know the financial position of the business.
- Accounting method: When accounting is maintained under double entry system, balance sheet is prepared.
- Basis of preparation: It is prepared exclusively on the basis of ledger accounts.
- Reliability: It is regarded as a reliable statement.
- Missing of Facts: Since both the aspects of all transactions are duly recorded, no chance for missing of facts.
Statement of Affairs
- Objectives: To find out the capital of business.
- Accounting method: Statement of affairs is prepared when accounts are maintained under single entry system of accounting.
- Basis of preparation: It is prepared on the basis of some ledger accounts and estimates.
- Reliability: It is not regarded as reliable.
- Missing of Facts: There remains always a possibility for missing of facts, because the accounts are incomplete.