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    Net Worth & Solvency Glossary · Net Worth Mechanics

    Statement of Affairs: The Annexure Behind the Certificate

    noun · also "personal statement of affairs" for an individual; a different document of the same name is filed in insolvency
    Definition

    A statement of affairs is a dated list of everything a person or non-company entity owns and owes, with the difference between the two. It is used where no statutory balance sheet exists, typically for an individual, a proprietor, a partnership firm or a Hindu undivided family (HUF), and it is the annexure a CA attaches to a net worth certificate.

    • Written by Subham Jhunjhunwala
    • Reviewed by CA Sundram Gupta
    • Reviewed on · Updated

    See related terms

    The term in one glance

    Prepared for
    An individual A proprietor A partnership firm An HUF

    Not for a company: a company produces a balance sheet in a prescribed format.

    What it is
    A single-date scheduleAssets, liabilities and the difference, as at the date on its face
    Where it sits
    Annexed to the net worth certificateThe certificate states the figure; the statement shows how it was reached
    Signed by
    The person whose affairs it describesThe CA checks it against evidence and certifies separately
    What it is not
    Not a set of accounts, not an auditA presentation of a position, and it should say so

    What it contains

    01What a statement of affairs sets out for a non-company entity

    A company produces a balance sheet in a prescribed format. A proprietor, firm, HUF or individual often has no such statement, or has one only for the business side of their affairs. The statement of affairs fills that gap. It sets out five things, in this order.

    The five parts, on one page

    Labels only, no figures
    1. The date it speaks to

      Stated on its face. Everything below is the position as at that one date.

    2. Each asset, by class

      With the basis on which it is stated, so the reader knows what kind of value each line carries.

    3. Each liability, by creditor

      At the amount outstanding on that date.

    4. The difference: net worth on that date

      Assets less liabilities. This is the figure the certificate states.

    1. Notes on items that may become liabilities but are not yet

      Shown below the line, not inside the totals, so the difference is not understated by something that may never fall due.

    Same document, one person

    A "personal statement of affairs"

    The same document prepared for an individual. The parts and the order are the same; only the person whose affairs it describes changes.

    What it is, in accounting

    A presentation of a position, not a set of accounts

    And it should say so. That protects everyone: the reader knows what they are being given, and the preparer has not implied that an audit stands behind figures that were never audited.

    Unlike a balance sheet

    Not drawn from double-entry books in a prescribed format

    Prepared by
    Balance sheetA company
    Statement of affairsA person or non-company entity
    Drawn from
    Balance sheetA full set of double-entry books
    Statement of affairsThe records that actually exist
    Shape
    Balance sheetA prescribed format
    Statement of affairsA single-date schedule

    Why an annexure

    02Why it is attached to the certificate rather than summarised into it

    The purpose of a statement of affairs is to show the detail behind a figure. A certificate stating a single total asks the reader to trust it. A certificate with the statement attached lets the reader examine whichever line concerns them.

    One line

    A certificate stating a single total

    The reader is given one figure and asked to accept it. Nothing on the page says which property, which loan or which account produced it, or on what basis.

    Asks for trust
    The total, with its statement

    A certificate with the statement of affairs attached

    The reader can go to whichever line concerns them, see the basis on which it is stated, and check it. The preparer is committed to a basis for each line, not to a number alone.

    Can be examined
    What readers dispute
    • Rarely the total
    • A particular property value
    • The treatment of a loan to a relative
    • Whether a family vehicle belongs in the list at all

    Attaching the statement answers those questions in writing, where the answer can be checked. It also fixes the position in a form that can be revisited a year later.

    This is how a proprietor's net worth certificate, or a net worth certificate for a partnership firm, is usually put together: the certificate states the figure, and the statement of affairs behind it shows how the figure was reached.

    First signature The person whose affairs it describes

    Signs the statement and is answerable for its completeness: that nothing owned or owed has been left out.

    The question it answers: is this everything?

    Second signature The chartered accountant

    Checks the statement against evidence and certifies separately. The certificate stands on that check, not on the person's own word.

    The question it answers: does the evidence support each line?

    Where the lines come from

    03How proprietors, firms and HUFs compile one from Indian books and bank records

    A statement of affairs is compiled from the records that actually exist. Each kind of record establishes one kind of line.

    Bank statementsBalancesCash and deposits as at the date
    Title deeds and registration recordsImmovable propertyLand and buildings held in the name on the record
    Depository statementsSecuritiesShares and other holdings in the demat account
    The books of account, where keptStock, debtors and creditorsThe trading position of the business
    Loan statementsWhat is owedEach loan at the amount outstanding
    A proprietor

    Business and personal, in one statement

    Because in law there is one person. The shop's stock and the proprietor's own deposits belong on the same page.

    One person, one position
    A partnership firm

    The entity whose position is being certified

    The statement covers the firm, and its scope is stated on its face.

    Scope on the face
    An HUF

    The entity whose position is being certified

    The statement covers the HUF as the entity, and its scope is stated on its face.

    Scope on the face
    Where books are not kept, the position is rebuilt from primary records and the limitation is stated on the statement itself, not in a covering email.
    Same words, different document. In insolvency, "statement of affairs" also names a document filed in proceedings. That usage is outside this entry.

    Also see

    04Schedules usually prepared alongside a statement of affairs

    One schedule that sits below the line, one letter that stands behind the statement, and one record a CA reads against it.

    Below the line

    Contingent Liability

    Obligations that may never crystallise. They are listed below the line, not inside the totals.

    Read the definition
    Behind the statement

    Management Representation Letter

    The written confirmation the client signs that what has been presented is complete. It matters more here than for a company, because so little of the record has been examined externally.

    Read the definition
    Read against it

    Annual Information Statement (AIS)

    The tax department's record of reported income and transactions, which a CA can read against the statement for completeness.

    Read the definition

    Browse all terms: Net Worth & Solvency Glossary

    Written by Subham Jhunjhunwala · Reviewed by CA Sundram Gupta

    Reviewed on: Last updated: Applies to: individuals, proprietors, partnership firms and HUFs whose net worth is being certified

    This entry explains the term as it is used when a chartered accountant certifies the net worth of a person or non-company entity. It is not advice on a particular person's position, and it does not describe the document of the same name filed in insolvency proceedings.

    Need help with a certificate that uses statement of affairs? See our Net Worth Certificate for a Proprietorship.The certificate states the figure; the statement of affairs behind it shows how the figure was reached.

    This entry describes Indian practice in general terms.