What is meant by a 'statement of affairs'? How can the profit or loss of a trade be ascertained with the help of a statement of affairs?
What is meant by a 'statement of affairs'? How can the profit or loss of a trade be ascertained with the help of a statement of affairs?
It is a statement that shows assets and liabilities, that is prepared at the beginning and end of one accounting period. Assets and liabilities are shown in two sides similar to a balance sheet. However, the basic difference between statement of affairs and balance sheet is that, the former is prepared from incomplete records while the latter is prepared from ledger entries. Capital is said to be the difference between the totals of assets and liabilities.
Capital will be shown at the beginning and end of accounting period when a statement of affairs is prepared. Using this information, a statement of profit and loss is prepared to find out the profit or loss. Adjustments needs to be made for withdrawals by owner and for fresh capital introduced by owners during the period.
A business earns profit if the net results of calculation is positive and is said to make a loss if the results are negative. Thus, profit and loss of owners can be determined using this process.
It is a statement that shows assets and liabilities, that is prepared at the beginning and end of one accounting period. Assets and liabilities are shown in two sides similar to a balance sheet. However, the basic difference between statement of affairs and balance sheet is that, the former is prepared from incomplete records while the latter is prepared from ledger entries. Capital is said to be the difference between the totals of assets and liabilities.
Capital will be shown at the beginning and end of accounting period when a statement of affairs is prepared. Using this information, a statement of profit and loss is prepared to find out the profit or loss. Adjustments needs to be made for withdrawals by owner and for fresh capital introduced by owners during the period.
A business earns profit if the net results of calculation is positive and is said to make a loss if the results are negative. Thus, profit and loss of owners can be determined using this process.
