What is meant by a ‘statement of a | Class 11 Accountancy Chapter Accounts from Incomplete Records, Accounts from Incomplete Records NCERT Solutions

Question:

What is meant by a ‘statement of affairs’? How can the profit or loss of a trader be ascertained with the help of a statement of affairs?

Answer:

According to this method, the profits are ascertained by comparing the capital at the end and capital at the beginning of the accounting period. If the capital at the end of an accounting period is more than that at the beginning, the difference is treated as profit. If, on the other hand, the capital at the end is less than that of beginning, the difference is treated as loss.

As such, in order to ascertain profit according to this method, it is necessary to calculate the capital at the beginning of the year and also at the end of the year. Capital at the beginning is calculated by preparing an ‘Opening Statement of Affairs’ and similarly, capital at the end is calculated by preparing a ‘Closing Statement of Affairs’.

                                      STATEMENT OF AFFAIRS
                                                  as at .................

Liabilities Amount () Assets Amount ()
 Bank Overdraft    Cash in hand  
 Bills Payable    Cash at Bank  
 Sundry Creditors    Bills Receivable  
 Outstanding Expenses    Sundry Debtors  


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Welcome to the NCERT Solutions for Class 11 Accountancy - Chapter . This page offers a step-by-step solution to the specific question from Excercise 2 , Question 1: What is meant by a ‘statement of affairs’? How can the profit or loss of a trader be asc....