Statement of affairs relies on asset and liability valuations

Steps:

• Identify the purpose: A statement of affairs shows a business's financial position in single-entry systems, similar to a balance sheet.
• List components: It requires detailing all assets (what the business owns) and liabilities (what it owes).
• Estimate values: Gather current market or book values for assets and liabilities.
• Calculate net worth: Subtract total liabilities from total assets to find owner's equity.

Why D is correct:

• By definition, a statement of affairs is prepared using the estimated values of assets and liabilities to compute capital as Assets - Liabilities.

Why the others are wrong:

• A: A trial balance summarizes double-entry accounts but is not required for the single-entry statement of affairs.
• B: An income statement reports revenues and expenses for profit calculation, unrelated to asset-liability listing.
• C: Books of prime entry record transactions but do not provide the summarized values needed for the statement.

Final answer: D