Question

Differentiate between statement of affairs and balance sheet.

Answer 1

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.