Difference Between Statement of Affairs and Balance Sheet
Statement of Affairs vs Balance Sheet
The key difference between Balance Sheet and Statement of Affairs is that the balance sheet is one among the financial statements,
which presents the financial position of a particular business to a
given date while, in contrast, statement of affairs summarizes the
assets and liabilities of a particular business entity. Particularly,
the financial position is measured considering the three main
components: assets, liabilities and equity, in the balance sheet.
The figures incorporated in the balance sheet help decision makers to
identify the level of risk that the entity faces with. On the other
hand, the results of the statement of affairs carry the level of insolvency,
i.e. the amount of capital that will remain after settling down all the
liabilities to a given date. Despite presenting book values of the
assets and liabilities, this statement presents the recoverability of
the investment done after settling all the obligations by selling off
its assets.
What is a Balance Sheet?
Balance sheet, also known as the statement of financial position
(for not for profit organizations), is an indicator of the financial
position of a given entity to a specific date. It reports aggregate
balances of assets, liabilities and equity accounts as the end of a
certain period, usually a year. Balance sheet measures financial health
of a business entity. Therefore, by analyzing balance sheet figures, the
stakeholders can arrive at various decisions particularly for planning
volatility of future earnings.
What is a Statement of Affairs?
Statement of affairs (SOA)
is also identified as a record of financial position of a particular
business entity at a given time. The key purpose of SOA is to afford
relevant information for the interested parties such as shareholders,
customers, employees, competitor, etc. Rather than exhibiting book
values of the assets and liabilities, SOA considers the amount at which
the organization can recover after selling off their assets and settling
their outside obligations.
When
looking at the similarities between Balance Sheet and Statement of
Affairs one can say that both statements talk about financial position
of a particular business entity in terms of liquidity.
What is the difference between Balance Sheet and Statement of Affairs?
Statement of Affairs vs Balance Sheet Summary
Balance
sheet and statement of affairs are two statements prepared to assess
the financial position of a particular business entity. Balance sheet is
a mandatory requirement under accounting procedures, which is prepared
by aggregating balances of all the ledger accounts. In contrast,
statement of affairs presents the insolvency level of a business entity,
emphasizing the net realizable and payable values of assets and
liabilities. Both of these statements help decision makers to make
financial and investment decisions in a substantial manner.
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