Q.The Statement of Affairs Method of ascertaining profit under the Single Entry System is also 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 (b).

Why the other options are wrong: (a) the Conversion Method is a genuinely different technique (Section 5 of this chapter) — it reconstructs a full Trading and Profit and Loss Account and Balance Sheet from incomplete records, typically using Total Debtors and Total Creditors Accounts, rather than simply comparing capital at two dates. (c) the Double Account Method is an entirely unrelated method of presenting final accounts, historically used mainly by public utility undertakings (railways, electricity companies), and has nothing to do with incomplete records. (d) a Trial Balance is a completely diff …

Students sometimes confuse the Statement of Affairs (Net Worth) Method with the Conversion Method, since both arise under the same broad topic of incomplete records — but the Statement of Affairs Method only ESTIMATES …