Concept:A statement of affairs is used under the single entry system to determine a trader's capital by comparing assets and liabilities.
Explanation:A single entry system lacks complete double entry records, so profit cannot be found directly from ledger accounts.
A statement of affairs is therefore prepared to ascertain capital.
It shows all the trader's assets on one side and all liabilities on the other side at a given date.
Capital is calculated as total assets minus total liabilities.
To establish profit or loss, statements of affairs are prepared at the beginning and at the end of the accounting period.
The difference between closing capital and opening capital, adjusted for additional capital and drawings, gives the profit or loss.
Gross profit arises from a trading account, a suspense account corrects ledger errors, and an appropriation account shares profits; none of these ascertains capital in a single entry system.
Answer:B. statement of affairs