Statement of Affairs under Single-Entry System

The statement of assets and liabilities prepared under the single-entry system is called the statement of affairs. It is a document that shows the financial position of an individual or a business at a particular date. The statement of affairs is prepared by listing the assets and liabilities of the business and calculating the net worth of the business.

Assets

Assets are resources that a business owns and can be used to generate income. They are listed in the statement of affairs at their current market value. Assets can be classified into different categories, such as:

- Fixed assets: These are assets that are expected to provide benefits to the business for more than one year, such as land, buildings, machinery, and equipment.
- Current assets: These are assets that are expected to be converted into cash within one year, such as inventory, accounts receivable, and cash in hand or bank.

Liabilities

Liabilities are obligations that a business owes to others and must be paid off. They are listed in the statement of affairs at their current market value. Liabilities can be classified into different categories, such as:

- Long-term liabilities: These are liabilities that are payable after one year, such as loans and mortgages.
- Current liabilities: These are liabilities that are payable within one year, such as accounts payable, taxes payable, and bank overdrafts.

Net Worth

The net worth of a business is calculated by subtracting the total liabilities from the total assets. It represents the total value of the business that belongs to the owner(s) after all the liabilities have been paid off. The net worth can be positive or negative, depending on whether the assets are greater or less than the liabilities.

Conclusion

In summary, the statement of affairs is a document that shows the financial position of a business under the single-entry system. It lists the assets and liabilities of the business and calculates the net worth. It is an important tool for business owners to monitor their financial health and make informed decisions.