Q.Under the Single Entry System, the method that ascertains profit by comparing the trader's capital at the beginning and at the end of the year is known as:

The method compares the trader's own net worth (capital) at two dates to infer profit, which is exactly why it is also called the Net Worth Method.

The Statement of Affairs Method infers a trader's profit by comparing the trader's own Capital (Net Worth) — Total Assets minus Total Outside Liabilities — as at the beginning and the end of the accounting period, adjusted for any capital introduced or drawings made during the period. Because the entire technique is built around tracking the trader's NET WORTH over time, it is also, and very commonly, called the Net Worth Method — option (a).

Why the other options are wrong: (b) the Conversion Method is a genuinely different, more advanced technique that reconstructs a full Trading and Profit and Loss Account and Balance Sheet from incomplete records — it goes well beyond simply comparing capital at two dates. (c) a Trial Balance is a completely different accounting tool used to check the arithmetical accuracy of a full double-entry ledger — under the Single Entry System, by definition, no Trial Balance can even be prepared, since real and nominal accounts are not fully maintained. (d) the Double Accoun …

Students sometimes pick the Conversion Method, since both arise under the same broad topic of incomplete records — but the Statement of Affairs Method only ESTIMATES overall profit through a capital comparison, while the Conversion Metho …