Which statement best distinguishes a statement of affairs from a balance sheet?
Correct answer: A. A statement of affairs may include estimated figures
- A. A statement of affairs may include estimated figures
- B. A statement of affairs always includes a trial balance
- C. A balance sheet excludes all liabilities
- D. A balance sheet records only cash transactions
Explanation
A statement of affairs is prepared from incomplete information and may contain estimates of assets and liabilities. A balance sheet is normally supported by properly maintained double-entry records and a trial balance. Liabilities and non-cash assets are included in a balance sheet.
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About Incomplete Records
Incomplete records require profit and financial position to be reconstructed when a complete double-entry system is unavailable. Methods include statements of affairs, capital comparisons, control accounts, cash summaries and margin calculations to find missing sales, purchases, expenses, assets, liabilities and drawings, while distinguishing business profit from changes in capital.
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