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Question
Differentiate between statement of affairs and balance sheet.
Solution
| Basis of Distinction | Statement of Affairs | Balance Sheet |
| 1. Objective | Statement of affairs is generally prepared to find out the capital of the business. | Balance sheet is prepared to ascertain the financial position of the business. |
| 2. Accounting system | Statement of affairs is prepared when the double entry system is not strictly followed. | Balance sheet is prepared when accounts are maintained under the double entry system. |
| 3. Basis of preparation | It is not fully based on ledger balances. Wherever possible ledger balances are taken. Some items are taken from some source documents and some items are more estimates. | It is prepared exclusively on the basis of ledger balances. |
| 4. Reliability | It is not reliable as it is based on incomplete records. | It is reliable as it is prepared under a double entry system. |
| 5. Missing items | It is difficult to trace the items omitted as complete records are not maintained. | Since both aspects of all transactions are dully recorded, items omitted can be traced easily. |
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RELATED QUESTIONS
Statement of affairs is a ___________.
The amount of credit sales can be computed from _____________.
Opening balance of debtors: ₹ 30,000, cash received: ₹ 1,00,000, credit sales: ₹ 90,000; closing balance of debtors is ______________.
State the accounts generally maintained by small sized sole trader when a double-entry accounting system is not followed.
What is a statement of affairs?
Following are the balances in the books of Thomas as on 31st March 2019.
| Particulars | ₹ | Particulars | ₹ |
| Sundry creditors | 6,00,000 | Bills payable | 1,20,000 |
| Furniture | 80,000 | Cash in hand | 20,000 |
| Land and building | 3,00,000 | Bills receivable | 60,000 |
| Sundry Debtors | 3,20,000 | Stock | 2,20,000 |
Prepare a statement of affairs as on 31st March 2019 and calculate capital as at that date.
On 1st April 2018 Subha started her business with a capital of ₹ 1,20,000. She did not maintain a proper book of accounts. Following particulars are available from her books as on 31.3.2019.
| Particulars | ₹ | Particulars | ₹ |
| Bank overdraft | 50,000 | Stock-in-trade | 1,60,000 |
| Debtors | 1,80,000 | Creditors | 90,000 |
| Bills receivable | 70,000 | Bills payable | 2,40,000 |
| Computer | 30,000 | Cash in hand | 60,000 |
| Machinery | 3,00,000 |
During the year she withdrew ₹ 30,000 for her personal use. She introduced further capital of ₹ 40,000 during the year. Calculate her profit or loss.
Raju does not keep proper books of accounts. Following details are taken from his records.
| Particulars | 1.1.2018 ₹ |
31.12.2018 ₹ |
| Cash at bank | 80,000 | 90,000 |
| Stock of goods | 1,80,000 | 1,40,000 |
| Debtors | 90,000 | 2,00,000 |
| Sundry creditors | 1,30,000 | 1,95,000 |
| Bank Loan | 60,000 | 60,000 |
| Bills payable | 80,000 | 45,000 |
| Plant and machinery | 1,70,000 | 1,70,000 |
During the year he introduced further capital of ₹ 50,000 and withdrew ₹ 2,500 per month from the business for his personal use. Prepare the statement of profit or loss with the above information.
Ananth does not keep his books under double entry system. Find the profit or loss made by him for the year ending 31st March, 2019.
| Particulars | 31.3.2018 ₹ |
31.3.2019 ₹ |
| Cash at Bank | 5,000 (Dr.) | 60,000 (Cr.) |
| Cash in hand | 3,000 | 4,500 |
| Stock of goods | 35,000 | 45,000 |
| Sundry Debtors | 1,00,000 | 90,000 |
| Plant and Machinery | 80,000 | 80,000 |
| Land and Buildings | 1,40,000 | 1,40,000 |
| Sundry Creditors | 1,70,000 | 1,30,000 |
Ananth had withdrawn ₹ 60,000 for his personal use. He had introduced ₹ 17,000 as capital for the expansion of his business. Create a provision of 5% on debtors. Plant and machinery is to be depreciated at 10%.
Which of the following items relating to bills payable is transferred to the total creditors account?
