Steps for preparing statement of affairs. The following steps may be taken for preparing the Statement of Affairs.
(i) In most cases in single entry system, a cash book is maintained. In case, this has been done, the cash and the bank balances can be taken from the cash book. In the absence of a proper cash book, cash balance may have to be found out by preparing a receipts and payments account on the basis of information collected from the proprietor of the business and the statement of accounts which might have been received or sent by the proprietor from/to his debtors and creditors. Information regarding other business expenses can be collected from the salaries register of his employees, petty cash book if any maintained by him, etc., and the actual cash balance available with the business. The balance at the bank can be verified from the bank pass book or Statement of Account from the Bank.
(ii) A list of sundry debtors and creditors should be prepared. This may not be difficult because in mostcases, a record of personal accounts is maintained under the single entry system.
(iii) The value of the fixed assets like building, plant, furniture. etc., should be ascertained from vouchers or other documents available with the business. A reasonable charge for depreciation should also be made and the assets should be shown in the Statement of Affairs after charging depreciation.
(iv) A physical verification of the stock should be taken and the value of the stock in hand should be ascertaIned on the basis of the different invoices received from suppliers from time to time in respect of the goods purchased.
(v) The amount of outstanding expenses and the accrued income should also be determined. Last year’s figures about these items may be of considerable help in this respect.
(iv) The excess of assets over liabilities should be found out and this will denote the net worth or the capital of the business on the date on which the Statement of Affairs has been prepared.