In the double-entry system, the balance sheet or statement of financial position is scientifically prepared on the basis of complete information on the business’s assets and liabilities to disclose the correct financial position of the organization at the end of the defined time.
However, the statement of affairs fails to present a realistic financial picture of the transaction because the single entry system is fictional and misleading. That is why it is referred to as a statement of affairs rather than a statement of financial position.
Although the statement of financial position and balance sheets are prepared using the double-entry system and the single entry system, respectively, and the number of assets and liability are presented, there is a large differentiation between the statement of financial position and the statement of affairs, which is presented below.
Balance Sheet vs Statement of Financial Affairs
The top 9 differences between the balance sheet and the statement of financial affairs are as follows:
|Sl. No||Subject of Differences||Balance Sheet||Statement of Affairs|
|1.||Definition||A balance sheet is a statement of a financial institution’s assets and liabilities on a specific date of accounting in a double-entry system.||The statement of affairs is a statement made on the basis of the institution’s assets and liabilities at the beginning or end of the accounting period in a single entry system.|
|2.||Purpose||The main purpose of the balance sheet is to determine the exact financial condition of the organization.||The main purpose of the statement of affairs is to determine the capital on the basis of the difference between assets and liabilities.|
|3.||Determination of Capital||In a double-entry system, capital is kept in a separate ledger. By putting the balance of the capital account on the liability side of the balance sheet, assets and liabilities are equated.||The difference between assets and external liabilities in the statement of affairs is used to calculate capital. By putting capital next to the liability, the sum of the asset and liability is equalized.|
|4.||Preparation||The balance sheet is created after the profit and loss account or income statement has been completed.||The statement of affairs is prepared before the profit-loss statement for the purpose of determining capital.|
|5.||Information Sources||The balance sheet is meticulously prepared using the asset account, the adjusted balance of the nominal account, and the personal account.||Unscientific statements of affairs are prepared based on incomplete calculations, fabricated information, memory, and conjecture.|
|6.||Verification of Mathematical Accuracy||The trial balance is prepared with the balance of the ledger account in order to verify the mathematical accuracy of the accounted transaction.||Since the statement of affairs is not prepared on the basis of trial balance, mathematical accuracy cannot be verified.|
|7.||Reliability||Since all accounting information related to business transactions is stored in this manner, the balance sheet provides reliable information about the organization’s financial condition.||Since not all transactional information is stored in this manner, the statement of affairs does not provide accurate and reliable information.|
|8.||Automation||The balance sheet’s two sides are automatically matched.||The sum of the two sides of the statement of facts cannot be automatically matched. In this case, the difference in the liability side is shown as capital.|
|9.||Reflection of Financial Condition||The balance sheet is prepared from the books of orderly and complete accounts, as well as the preparation of journal, ledger, and trial balance, it reflects the organization’s correct, accurate, and real financial condition.||The statement of affairs is prepared based on incomplete account books, and conjecture-based information cannot accurately reflect the business’s financial condition.|