ch-18

Question 1

Define statement of affairs

Answer 1

It is a statement of assets and liabilities. The difference between the 2 sides represents the proprietors capital

Question 2

State the features of single entry system

Answer 2

1. Suitability-Small business
2. No uniformity
3. Maintenance of personal accounts
4. Maintenance of cash book
5. Dependence on original vouchers
6. Difficulty in preparation of final accounts

Question 3

What are the disadvantages of single entry system

Answer 3

1. Arithmetical accuracy cannot be proved
2. No control on assets
3. Correct profit/Loss cannot be determined
4. Financial position of the business cannot be assessed
5. No internal check
6. Difficult to ascertain the value of business
7. Incomplete and unscientific system
8. Comparative study is difficult

CAPITAL=TOTAL ASSETS-LIABILITIES