Skip to content

CMA Intermediate · Financial Accounting · Financial Statements from Incomplete Records

Which statement about the Statement of Affairs method of ascertaining profit from incomplete records is correct?

The Statement of Affairs resembles a Balance Sheet but is not prepared from double-entry books; assets and liabilities are listed from information available, and capital is the balancing figure. Comparing two such capitals gives net profit, not gross profit.

  1. AIt is prepared like a Balance Sheet but is not based on double entry, and capital is the balancing figureCorrect
  2. BIt is a ledger account showing all debits and credits for the year
  3. CIt gives a detailed Trading Account and gross profit directly
  4. DIt is mandatory under AS 1 for every business

Explanation

A Statement of Affairs lists assets and liabilities like a Balance Sheet, but since records are incomplete it is not drawn from a trial balance; capital is the difference between assets and liabilities. The method gives only net profit, not gross profit, and is not an AS 1 requirement.

Did you get it right without looking?

One question tells you little. A timed set on Financial Statements from Incomplete Records shows your real accuracy, how long you take and where you lose marks.

Practise Financial Statements from Incomplete RecordsFree diagnostic mock

More Financial Statements from Incomplete Records questions