11.3.2 Difference between Statement of Affairs and Balance Sheet

. . Difference between Statement of Affairs and Balance Sheet Both statement of affairs and balance sheet show the assets and liabilities of a business entity on a particular date. However, there are some fundamental differences between the two.

A statement of affairs is prepared from incomplete records where most of the assets are recorded on the basis of estimates as compared to a balance sheet which is prepared from records maintained on the basis of double entry book-keeping and all assets and liabilities can be verified from the ledger accounts. Hence, a balance sheet is more reliable than a statement of affairs. The objective of preparing a statement of affairs is to ascertain the amount of capital account as on that date whereas a balance sheet is prepared to know the financial position of the business at a particular date. In statement of affairs, an item of assets or liabilities may get omitted and this omission may remain unknown because the effect of this omission gets adjusted in the capital account balance and the total of both sides of statement match.

However, in case of a balance sheet the possibility of omission of any item is remote because in case of an omission, the balance sheet will not agree and the accountant will