Statement Of Affairs

Updated on February 23, 2024
Article byKhalid Ahmed
Edited byRaisa Ali
Reviewed byDheeraj Vaidya, CFA, FRM

What Is A Statement Of Affairs (SOA)?

A statement of affairs (SOA) in accounting is a summary of a firm’s assets and liabilities, prepared under the single-entry system based on the opening or closing date of the financial year. It serves to determine the firm’s total capital and anticipates the possibility of insolvency.

Statement of Affairs

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The SOA becomes significant in estimating the capital available to creditors in the event of liquidation, as per legal requirements. The document presents the estimated realizable value and liabilities predicted to rank. It is generally drafted by a turnaround professional or an insolvency practitioner using financial documents with the assistance of company directors.

Key Takeaways

  • The statement of affairs (SOA) summarizes a firm’s assets and liabilities under a single-entry method, either at the opening or closing date of the financial year, particularly in anticipation of insolvency.
  • It plays a crucial role in estimating the capital available to creditors in the event of liquidation, meeting legal requirements.
  • Differentiating from the double-entry bookkeeping system of the balance sheet, the SOA utilizes a single-entry bookkeeping system.
  • Essential components of an SOA include valuations of assets, the latest balance sheet, comprehensive employee information, taxation details, amounts owed to various entities, and a detailed list of all debts.

Statement Of Affairs Explained

A statement of affairs is a legally required document that details conditions, status, position, and schedules in a financial statement, specifically prepared for the worst-case scenario in the event of bankruptcy. It is prepared at the start and end of the financial year.

Objectives of the SOA include:

  • Providing requisite information to stakeholders such as creditors, shareholders, government authorities, employees, insolvency practitioners, customers, rivals, and potential buyers.
  • Showing the book value of a company’s assets.
  • Manifesting the potential sale value of a firm.
  • Outlining the firm’s duty towards payment of dues to its creditors.
  • Listing the shareholders and creditors of a firm.
  • Giving an idea of available funds for payments to shareholders and creditors.

The board of directors (BOA) is responsible for presenting the SOA either before or after the occurrence of insolvency. Insolvency practitioners use the document to investigate business affairs and assess the real performance of a firm in terms of recovered asset worth. Furthermore, SOA becomes part of the investigation into directors’ conduct preceding insolvency. Directors not providing it may face fines and damage their overall conduct reputation. Additionally, the SOA aids in tracking funds generated from asset sales, enabling comparison with insolvency practitioner estimates.

The SOA is a vital document used in various insolvency proceedings, including administration, compulsory liquidation, voluntary liquidation, and company voluntary arrangements (CVA). The SOA may not be accurate because it relies on estimated financial figures. Its primary aim is to provide details of the value realized after selling the company’s assets. It also aids in investigating the conduct of directors post-insolvency. Failure to present the SOA during insolvency can lead to heavy fines and damage to the practitioner’s reputation.


An SOA is a key factor in the insolvency procedure and should include information such as:

  • Valuations of assets.
  • Latest balance sheet and management accounts.
  • Comprehensive employee information, including salaries, experience, posts, and addresses.
  • Taxation details.
  • Amounts owed to creditors, banks, directors, and shareholders interests.
  • All debts.


Let us look into a few examples:

Example #1

Consider a small business owner, Anna, who assesses her company’s financial position by preparing a statement of affairs. Anna compiles a table summarizing her assets and liabilities using a single-entry bookkeeping system. This SOA helps Anna in understanding the financial health of her business:

Statement of Affairs
As of 1 January 2024
AssetsAmount ($)LiabilitiesAmount ($)
Stock in trade5,000Creditors8,000
Debtors5,000Accounts Payable5,000
Equipment15,000Capital (Balancing Figure)17,000
Total Assets30,000Total Liabilities30,000

Example #2

Suppose Sarah is a freelance graphic designer interested in organizing her work and financial affairs. Sarah decides to create a statement of affairs. She lists her business assets, such as design tools, computer equipment, and client contracts. On the liabilities side, she notes outstanding invoices and upcoming expenses. This SOA serves as a helpful organizational tool for Sarah to understand the components shaping her professional standing, facilitating better planning and decision-making in her freelance endeavors.

Difference Between Statement Of Affairs And Balance Sheet

The differences between the two are as follows:

Statement Of AffairsBalance Sheet
Based on a single-entry systemBased on a double-entry system

Represents various facets of accounts but is not more than a figure for balancing
Always derived from ledger accounts, ensuring total liabilities equal total assets
Does not form a part of the financial statementForms an essential part of a financial statement
Used in knowing the closing or opening capitalUsed to represent the firm’s actual financial position
No standard format specifiedPrepared using a fixed standard format

Frequently Asked Questions (FAQs)

1. What is the importance of the statement of affairs?

The statement of affairs (SOA) is important for businesses to understand their financial standing. It provides a comprehensive overview of assets, liabilities, and capital, aiding in strategic decision-making, financial planning, and evaluation of solvency. Businesses use SOAs to assess their net worth, making it an essential tool for effective financial management.

2. How does a statement of affairs (SOA) help creditors?

Creditors benefit from a statement of affairs (SOA) as it assists in evaluating potential recoveries in case of insolvency. An SOA provides crucial insights into its financial health by detailing a company’s assets and liabilities. This enables creditors to make informed decisions on debt recovery strategies and assess the likelihood of obtaining satisfactory repayments.

3. What are the limitations of the statement of affairs?

The statement of affairs has limitations. It relies on estimated figures, which may lack precision, and it provides only a snapshot of a company’s financial health. Additionally, it may not fully account for intangible assets or sudden market changes, emphasizing the need for a multifaceted approach to financial analysis.

This article has been a guide to what is Statement of Affairs. Here, we explain its differences with the balance sheet, and explain its examples and contents. You may also find some useful articles here –

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