Statement of Profit/Loss

A Statement of Affairs is a statement of all assets and liabilities. The difference between the amount of two sides is taken as capital.

(i) It does not reflect correct profit.
(ii) Balance sheet does not reflect correct financial position.

(i) This system is suitable for sole traders or partnership firm doing small scale business
(ii) There is no uniformity as their system differs flom firm to firm.

(i) Simple method: Proprietors, who do not have the proper knowledge of accounting principles. Find it much convenient and easier to maintain their business records under this system.
(ii) Less expensive: It is an economical mode of maintaining records as there is no need to appoint specialised accountant.
(iii) Flexible: Owner may record transactions as particular own needs. It can be easily adjusted or changed whenever needed.
(iv) Less time consuming: Maintaining books according to the single entry system is less time consuming, as only few books are to be maintained. Further the books are not as comprehensive as they are under double entry system.

Statement of affairs prepared under single entry system is not called a balance sheet because statement of affairs is not prepared with the list of ledger balances kept on the basis of double entry system. Also value of assets and liabilities shown in statement of affairs are only the estimates and not the actual values.

No, due to legal restrictions, a company cannot maintain its accounts under single entry system.

No, as arithmetical accuracy is checked by preparing a trial balance and in case of single entry system a trial balance cannot be prepared as it does not record both aspects of a transaction.