Question

Distinguish between statement of affairs and balance sheet.

Answer 1

The statement of affairs is a Statement of Assets and Liabilities.The main difference between a Statement of Affairs and a Balance Sheet is that while the former is prepared on the basis of physical counts and improper source documents, the latter is prepared purely on the basis of ledger accounts. Thus, the authentication and relevance of the latter is guaranteed.

Following are the main differences between statement of affairs and balance sheet.

$\begin{array}{ccc}BasisofDifference& StatementofAffairs& BalanceSheet\\ \text{Reliability}& \text{Reliability of statement of affair}& \text{It is more reliable as it is}\\ & \text{is less as it is prepared from}& \text{prepared from complete}\\ & \text{incomplete records.}& \text{records of double entry system.}\\ \text{Objective}& \text{The objective of preparing}& \text{The objective of preparing}\\ & \text{statement of affairs is to}& \text{balance sheet is to show the}\\ & \text{estimate the balance in capital}& \text{true financial position of an}\\ & \text{account on a particular date.}& \text{entity on a particular date.}\\ \text{Omission}& \text{Omission of assets or liabilities}& \text{Omission of assets or liabilities}\\ & \text{cannot be discovered easily. As}& \text{can be discovered easily and}\\ & \text{records are incomplete.}& \text{can be traced from accounting}\\ & & \text{records.}\end{array}$