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CA Foundation · Accounting · Accounts from Incomplete Records

Which statement about the Statement of Affairs prepared by a trader who does not keep double entry books is correct?

A Statement of Affairs resembles a balance sheet but is drawn from incomplete records, so some asset values are estimated and capital is the balancing figure, equal to total assets minus outside liabilities. It is not based on a trial balance.

  1. AIt is prepared like a balance sheet, but values of some assets are estimated and capital is the balancing figureCorrect
  2. BIt is a ledger account showing the trader's cash transactions
  3. CIt is prepared only at the end of the year from a trial balance
  4. DIt always shows exact values for all assets because records are complete

Explanation

A Statement of Affairs lists assets and liabilities, often with estimated figures as records are incomplete. Capital is the balancing figure (assets minus liabilities). It is not a ledger or trial balance based statement.

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