Difference Between Statement of Affairs and Balance Sheet:
Learning Objectives:
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What is the difference between statement of affairs and balance sheet?
As real or property accounts are not maintained and also because a capital account does not exist under the single entry system, a balance sheet cannot be prepares in the same way as is done under the double entry system. However, in order to have an idea about the financial position on a particular date information concerning the available assets and liabilities is gathered and a statement is prepared setting in it assets and liabilities on the date; this statement is called a statement of affairs. The assets and liabilities are set out in the form of a balance sheet. The excess of assets over liabilities is shown as capital.
Balance sheet and statement of affairs may be distinguished as follows:
| Statement of Affairs | Balance Sheet | ||
| (1) | It is a statement of assets and liabilities (including capital) prepared under the single entry system | (1) | It is statement of assets and liabilities (including capital) prepared under the double entry system. |
| (2) | It is prepared partly from a trader’s books, partly from other sources of information and sometimes from memory | (2) | It is prepared with data available from the books of accounts only. |
| (3) | It is compiled from an incomplete books and information, the accuracy of which cannot be relied upon | (3) | It is prepared from a set of books kept according to the double entry system, the arithmetical accuracy of which can be proved. |
You may also be interested in other articles from “single entry system” chapter:
- Definition and Explanation of Single Entry System
- Defects/Limitations/Disadvantages of Single Entry System
- Statement of Affairs – First Method
- Difference Between Statement of Affairs and Balance Sheet
- Conversion into Double Entry System
Shamsa Rafique