Section 2 of 10
A statement of affairs is used to calculate capital when a full trial balance is not available. It applies the accounting equation:
Capital = Assets − Liabilities (or equivalently: Assets = Liabilities + Capital)
List all known assets on the left and all known liabilities on the right. Capital is the balancing figure.
Assets Liabilities & Capital
Bank balance x
Inventory x
Trade receivables x
Non-current assets x
Trade payables x
Bank loan x
Capital (balancing figure) x
─── ───
Total x x
Alternative (formula method):
| Assets £ | Liabilities & Capital £ | |
|---|---|---|
| Bank balance | 1 750 | |
| Equipment | 10 000 | |
| Inventory | 1 250 | |
| Long-term loan | 20 000 | |
| Machinery | 40 000 | |
| Trade payables | 910 | |
| Trade receivables | 500 |
Formula method:
| Assets £ | Liabilities & Capital £ | |
|---|---|---|
| Bank balance | 2 000 | |
| Equipment | 14 000 | |
| Inventory | 1 300 | |
| Long-term loan | 30 000 | |
| Machinery | 48 000 | |
| Trade payables | 1 000 | |
| Trade receivables | 700 |
Formula: 81 000 − 31 000 = 50 000
Exam tip: Always check whether a bank balance is an asset (positive) or a liability (overdraft — shown in brackets). An overdraft goes on the liabilities side.
Finished this chapter? Mark it complete to earn XP.
| Vehicles | 17 000 |
| Opening capital | 49 590 |
| Total | 70 500 | 70 500 |
| Vehicles | 15 000 |
| Closing capital | 50 000 |
| Total | 81 000 | 81 000 |