AccountancyCBSE Class 11 · Accounts from Incomplete Records

Statement of Affairs Class 11: Opening and Closing Capital in Incomplete Records

Updated 17 October 2026 · Fact-checked

A statement of affairs is a list of the assets and liabilities of a business on a date, prepared from information and memory when full double-entry books are not kept. Capital is the balancing figure: capital = assets − liabilities. It resembles a balance sheet but is not prepared from ledger balances, so its figures may be less reliable.

Both columns are equal in height because capital is just the balancing figure: assets minus outside liabilities, found at the opening and closing dates.

Illustration drawn for QuestionBuddy.

Understand Statement of Affairs: Opening and Closing Capital from Assets and Liabilities

Incomplete records (single entry). A firm keeps only cash records and personal accounts of debtors and creditors. No nominal and real accounts, no trial balance. Profit cannot be found from a Trading and P&L account, so the method of the statement of affairs is used.

Statement of affairs vs balance sheet.

Statement of affairs	Balance sheet
Prepared from incomplete records, estimates and memory	Prepared from ledger balances (trial balance)
Capital is the balancing figure	Capital comes from the capital account
Totals agree only because capital is the balancing figure, so agreement does not prove arithmetical accuracy	Totals agree through double entry, so agreement is a check on arithmetical accuracy
May not follow a prescribed format	Follows a proper format

Preparation. List all assets at their values (cash, bank, debtors, stock, fixed assets) and all liabilities (creditors, bills payable, outstanding expenses, loans). Capital = Total assets − Outside liabilities. The opening statement gives opening capital; the closing statement gives closing capital.

Details to remember.

Debtors are shown less any provision for doubtful debts and bad debts known.
Fixed assets are shown at book value after depreciation.
Prepaid expenses and accrued income are assets; outstanding expenses and income received in advance are liabilities.
Capital introduced during the year and drawings are used later to find profit (see the next topic).

Limitations of the method. It depends on memory, ignores the details of income and expense, and cannot show the real cause of profit or loss.

Statement of Affairs: Opening and Closing Capital from Assets and Liabilities: key facts

Capital: Total assets − Outside liabilities; Balancing figure.
Opening capital: Capital as per the opening statement of affairs; Start of the year.
Closing capital: Capital as per the closing statement of affairs; End of the year.
Check: Assets = Liabilities + Capital; Always holds by construction.

How to answer Statement of Affairs: Opening and Closing Capital from Assets and Liabilities questions

Preparation is a classification and subtraction exercise.

1List every asset with its value on the date.
2List every liability owed to outsiders.
3Subtract total liabilities from total assets to find capital.
4Show assets and liabilities in two columns and the capital as the balancing figure.
5Repeat for the second date if both opening and closing statements are asked for.

Statement of Affairs: Opening and Closing Capital from Assets and Liabilities in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

A grocer's memory

Suppose a grocer keeps no ledger. On 1 April he counts cash and stock and lists amounts due from and to others.

How can he find his capital?

Try it first, then show the solutionSolution

Add the values of everything the business owns.
Subtract everything it owes to outsiders; the remainder is his capital.

Answer: Capital = total assets − outside liabilities.

Memory hook: Own minus owe equals his own.

Tricks to remember Statement of Affairs: Opening and Closing Capital from Assets and Liabilities

Short memory aids. Say each one aloud once, then use it on a question the same day.

Own minus owe
Capital is what the business owns minus what it owes outsiders.
Use it when: Capital as a balancing figure.
SOA is a guess-list
The statement of affairs is built from listing and estimating, not from ledgers.
Use it when: Difference from balance sheet.

Statement of Affairs: Opening and Closing Capital from Assets and Liabilities: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Capital · 1 mark · MCQBoard level

If total assets are ₹1,75,000 and outside liabilities ₹73,000, the capital is:
(a) ₹2,48,000
(b) ₹1,02,000
(c) ₹73,000
(d) ₹1,75,000

Try it first, then show the solutionSolution

Assets minus liabilities.

Answer: (b) ₹1,02,000

Example 2: Why different from balance sheet · 3 marks · Short answerBoard level

State any three differences between a statement of affairs and a balance sheet. (3 marks)

Try it first, then show the solutionSolution

A statement of affairs is prepared from incomplete records and estimates; a balance sheet from ledger balances.
In the statement of affairs capital is a balancing figure; in the balance sheet it is a ledger balance.
In the statement of affairs, the totals agree only because capital is the balancing figure, so agreement does not prove arithmetical accuracy; in the balance sheet, the totals agree through double entry, so agreement is a check on accuracy.

Answer: Basis, treatment of capital, reliability.

Example 3: Opening statement of affairs · 5 marks · Long answerHarder board level

On 1 April a trader has cash ₹4,000, bank ₹20,000, debtors ₹30,000, stock ₹36,000, furniture ₹25,000, machinery ₹60,000; creditors ₹22,000, bills payable ₹8,000, outstanding expenses ₹3,000, loan ₹40,000. Prepare the opening statement of affairs. (5 marks)

Try it first, then show the solutionSolution

Total assets = 4,000 + 20,000 + 30,000 + 36,000 + 25,000 + 60,000 = ₹1,75,000.
Total outside liabilities = 22,000 + 8,000 + 3,000 + 40,000 = ₹73,000.
Capital (balancing figure) = 1,75,000 − 73,000 = ₹1,02,000.
Liabilities and capital column totals: 73,000 + 1,02,000 = ₹1,75,000.

Answer: Opening capital ₹1,02,000.

Example 4: Closing statement with adjustments · 6 marks · Long answerHarder board level

On 31 March the trader's figures are: cash ₹6,500; bank ₹31,000; debtors ₹38,000 on which a 5% provision is needed; stock ₹42,000; furniture ₹25,000 and machinery ₹60,000 on which depreciation of ₹2,500 and ₹6,000 is charged; creditors ₹27,000; bills payable ₹5,000; outstanding expenses ₹4,000; loan ₹40,000. Prepare the closing statement of affairs. (6 marks)

Try it first, then show the solutionSolution

Provision = 5% of 38,000 = 1,900; debtors = 36,100.
Furniture 22,500; machinery 54,000.
Assets = 6,500 + 31,000 + 36,100 + 42,000 + 22,500 + 54,000 = ₹1,92,100.
Liabilities = 27,000 + 5,000 + 4,000 + 40,000 = ₹76,000.
Closing capital = 1,92,100 − 76,000 = ₹1,16,100.

Answer: Closing capital ₹1,16,100.

Example 5: Finding a missing item · 4 marks · Short answerHOTS / competency

The assets of a firm are ₹2,40,000 and the owner says capital is ₹1,70,000. A creditor of ₹12,000 had been omitted from the list. Find the true outside liabilities and the corrected capital if the original list of liabilities was ₹70,000. (4 marks)

Try it first, then show the solutionSolution

Original liabilities = 2,40,000 − 1,70,000 = ₹70,000.
Add the omitted creditor: 70,000 + 12,000 = ₹82,000.
Corrected capital = 2,40,000 − 82,000 = ₹1,58,000.
The omission overstated capital by ₹12,000.

Answer: Liabilities ₹82,000; capital ₹1,58,000.

Where students lose marks in Statement of Affairs: Opening and Closing Capital from Assets and Liabilities

The slips examiners see most often, and what to write instead.

Mistake: Forgetting the provision on debtors
Showing debtors at the full figure.
Wrong working
Debtors 38,000.
Right working
Debtors 38,000 less provision 1,900 = 36,100.
Do this: Value debtors at the estimated realisable figure.
Usually costs: 1 mark
Mistake: Showing capital as an outside liability
Subtracting capital from assets twice.
Wrong working
Capital = assets − liabilities − capital.
Right working
Capital = assets − outside liabilities.
Do this: Capital is the balancing figure.
Usually costs: 1 mark
Mistake: Using cost of fixed assets without depreciation
Ignoring wear.
Wrong working
Machinery 60,000.
Right working
Machinery 54,000 after 6,000 depreciation.
Do this: Show at book value.
Usually costs: 1 mark

Exam tips

Prepare the statement in two columns with totals.
Label capital as "balancing figure".
List assets in order of liquidity and show provisions deducted.
Check the two totals are equal.

Practice questions on Statement of Affairs: Opening and Closing Capital from Assets and Liabilities

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
In a statement of affairs, capital is:
(a) taken from the ledger
(b) the balancing figure
(c) always zero
(d) the same as drawings
Hint
Own minus owe.
Answer
(b) the balancing figure
Q2 · 3 marks · Short answerHarder board level
Assets ₹2,40,000 and outside liabilities ₹70,000 at the beginning; assets ₹3,45,000 and liabilities ₹80,000 at the end. Find opening and closing capital and the change in capital. (3 marks)
Hint
Two subtractions.
Answer
Opening capital = 2,40,000 − 70,000 = ₹1,70,000. Closing capital = 3,45,000 − 80,000 = ₹2,65,000. Change = ₹95,000 increase.
Q3 · 4 marks · Short answerHarder board level
A trader's closing list shows debtors ₹60,000 (of which ₹5,000 is bad and ₹3,000 doubtful, to be provided in full), stock ₹80,000, cash ₹10,000, creditors ₹35,000, outstanding wages ₹2,000. Find the capital. (4 marks)
Hint
Debtors realisable = 60,000 − 5,000 − 3,000.
Answer
Debtors realisable = 52,000. Assets = 52,000 + 80,000 + 10,000 = 1,42,000. Liabilities = 37,000. Capital = ₹1,05,000.
Q4 · 1 mark · Assertion-reasonHarder board level
Assertion (A): A statement of affairs may not agree with a balance sheet drawn from proper books.
Reason (R): It is based on incomplete records and estimates.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.
Hint
Source of the figures.
Answer
(a) Both A and R are true, and R is the correct explanation of A.
Q5 · 4 marks · Short answerHOTS / competency
Two traders have identical assets of ₹3,00,000. Trader P lists liabilities of ₹90,000 and omits a creditor of ₹15,000; Trader Q lists correctly ₹1,05,000. Compare their stated capitals and state which is correct and why. (4 marks)
Hint
Omission affects capital directly.
Answer
P's capital = 3,00,000 − 90,000 = ₹2,10,000; Q's capital = 3,00,000 − 1,05,000 = ₹1,95,000. Q is correct. P's capital is overstated by ₹15,000 because the omitted creditor did not reduce it, an example of the unreliability of incomplete records.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.Capital formula?Show answer
Assets − outside liabilities.
2.Why is it called a balancing figure?Show answer
It is found as the remainder.
3.Who needs the statement of affairs?Show answer
Traders who keep single entry books.
4.Where do debtors appear?Show answer
Net of provision for bad and doubtful debts.
5.One limitation?Show answer
Based on memory and estimates.

Statement of Affairs: Opening and Closing Capital from Assets and Liabilities: frequently asked questions

What is incomplete records?

A system in which only some accounts, often cash and personal accounts, are kept.

Is a statement of affairs a ledger account?

No, it is a statement.

Why is it not as reliable as a balance sheet?

It is prepared from estimates and memory instead of ledger balances.