What is the Difference Between Statement of Affairs and Balance Sheet?

The main difference between a Statement of Affairs and a Balance Sheet lies in the reliability, source of information, and method of bookkeeping. Here are the key differences between the two:

Basis of Preparation: A Statement of Affairs is prepared when the accounts are incomplete or destroyed, while a Balance Sheet is prepared when the accounts are complete and fully maintained as per the Accounting Standards.
Reliability: A Statement of Affairs is based on incomplete records, making it less reliable compared to a Balance Sheet, which is prepared based on ledger accounts and accounting records.
Source of Information: A Statement of Affairs is prepared on the basis of estimates and information available, while a Balance Sheet is prepared on the basis of a Trial Balance, a Ledger, and a Financial Statement.
Method of Bookkeeping: A Statement of Affairs is prepared when the accounts are maintained under a single-entry system, while a Balance Sheet is prepared under the double-entry system.
Purpose: A Statement of Affairs provides a rough idea of a company's financial position at a specific point in time, while a Balance Sheet is a precise financial statement based on standard accounting practices.

In summary, a Statement of Affairs is an estimate of a company's assets and liabilities, prepared when the accounts are incomplete or destroyed, while a Balance Sheet is a more accurate and reliable financial statement based on complete and maintained accounts as per the Accounting Standards.

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What is the Difference Between Statement of Affairs and Balance Sheet?

Comparative Table: Statement of Affairs vs Balance Sheet

Here is a table summarizing the differences between a Statement of Affairs and a Balance Sheet:

Basis	Statement of Affairs	Balance Sheet
Objective	To find out the opening or closing capital or to evaluate the insolvency level of a business entity.	To show the company's financial position at a specific point in time.
Source of Information	Prepared on the basis of estimates, incomplete data, and single-entry bookkeeping.	Prepared on the basis of a Trial Balance, a Ledger, and double-entry bookkeeping.
Method of Bookkeeping	Prepared when accounts are maintained under single-entry bookkeeping.	Prepared under double-entry bookkeeping.
Emphasis	Emphasizes the net realizable and payable values of assets and liabilities.	Emphasizes long-term assets and liabilities.
Format	No specific format; prepared according to the Insolvency Act.	Has a specific format (Revised Schedule VI), as required by accounting procedures.
Reliability	Less reliable due to its reliance on estimates and incomplete data.	Highly reliable, as it is based on complete and accurate information.
Preparation Date	Prepared on either opening or closing date.	Prepared for a specific date.

A Statement of Affairs is a financial document that provides a snapshot of a company's financial position at a specific point in time, listing all of the company's assets, liabilities, and capital. It is generally less reliable as it relies on estimates and incomplete data. On the other hand, a Balance Sheet is a financial statement that shows a company's financial position at a specific point in time, including its assets, liabilities, and equity. It is highly reliable, as it is based on complete and accurate information.

Guilherme Mazui

Guilherme Mazui is graduated in journalism from the Federal University of Minas Gerais (UFMG) and a master's degree in Communication from the University of São Paulo (USP). In addition, he has experience in advertising writing and has worked as a content editor in several companies.