Statement of Affairs and its Purpose
A statement of affairs is a financial document that provides an estimate of the financial position of a business at a specific point in time. It is prepared by listing all the assets and liabilities of the business and calculating the net worth or equity. The purpose of a statement of affairs is to provide an overview of the financial health of a business, especially during times of insolvency or bankruptcy.

Importance of Accuracy
- Accuracy is crucial when preparing a statement of affairs because it provides a clear and reliable snapshot of the business's financial position.
- Creditors, shareholders, and potential investors rely on this document to assess the business's ability to meet its financial obligations and make informed decisions.
- Inaccurate information can lead to serious consequences, such as incorrect valuations of assets and liabilities, misleading financial ratios, and incorrect assessment of the business's solvency.

Limitations of a Statement of Affairs
- A statement of affairs is an estimate of the financial position because it is prepared based on available information and assumptions.
- It may not reflect the exact financial position of the business due to factors such as incomplete or outdated data, changes in market conditions, or uncertainties surrounding the valuation of assets.
- Therefore, it is important to exercise caution when interpreting the results of a statement of affairs and consider it as an approximate representation rather than an exact reflection of the business's financial position.

Conclusion
In conclusion, a statement of affairs shows only the estimated financial position of a business. While accuracy is essential in preparing this document, it is important to recognize its limitations as an estimate based on available information and assumptions. Therefore, it is necessary to review other financial statements and consider additional factors when assessing the true financial health of a business.