Ascertainment Of Financial Position

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Ascertainment of Profit (or Loss) And Financial Positions

The bitter taste of maintaining incomplete records or adopting any type of single entry system is felt when the income tax officer wants to know the evidence of annual income or when the sales tax personal seek information about the annual turnover; and also when the business enterprise wants to determine its financial position and operating results at the end of the accounting period. This creates some special problems for the accountants because in the absence of complete records it is not possible to prepare final accounts and produce an income statement for operating results and a balance sheet for the financial positions. However the accounting profession employs one of the two methods namely:

(i) Statement of Affairs Method and

(ii) Conversion Method depending on the available information to achieve the desired results.

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