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SSC Financial and Cost Accounting P-1 QUESTION #9643
Question 1
The key distinction between a Balance Sheet and a Statement of Affairs (in Single Entry System) is:
  • A Balance Sheet shows assets and liabilities at market value; Statement of Affairs shows at cost
  • A Balance Sheet presents resources against sources to show financial position; Statement of Affairs calculates owner's equity as a balancing figure✔️
  • A Statement of Affairs is prepared for partnerships only; Balance Sheet for sole proprietors
  • Both are identical; the only difference is the name used
Correct Answer Explanation
The Statement of Affairs is used ONLY to derive the owner's equity by subtracting liabilities from assets (Owner's Equity = Assets – Liabilities). A Balance Sheet presents the full financial position by matching resources (assets) against their sources (equity + liabilities).