What is meant by a 'statement of affairs'? How can the profit or loss of a trader be ascertained with the help of a statement of affairs?

Statement of affairs is a statement of assets and liabilities of a firm on a particular time.Through this statement we can compute the profit of the firm by comparing capital in the beginning and capital at the end of the year while making required adjustment.The following steps are used to ascertain the profit or losses:

Prepare statement of affairs in the beginning of accounting year for computing opening capital

Ascertain drawings and capital introduced during the accounting year

Prepare statement of affairs in the end of accounting year for computing closing capital

Prepare statement of profit by the given formula

Statement of affairs is a statement of assets and liabilities of a firm on a particular time.