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Simple English definitions for legal terms
statement of affairs
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A quick definition of statement of affairs:
A statement of affairs is a document that shows how much money a person or company has and how much they owe. It is like a report card for their finances. This document is usually prepared when someone is in financial trouble and needs to figure out how much they can pay back to their creditors. It shows the current value of their assets (things they own) and liabilities (things they owe) rather than what they originally paid for them.
A more thorough explanation:
A statement of affairs is a financial document that shows the immediate liquidation values of a company's assets and liabilities. It is usually prepared when the company is facing insolvency or bankruptcy.
For example, if a company is in financial trouble and needs to file for bankruptcy, it will prepare a statement of affairs to show its creditors how much money it owes and how much it can pay back. The statement will include a balance sheet that shows the current value of the company's assets and liabilities, rather than their historical costs.
Another example is when a person is going through a divorce and needs to divide their assets and liabilities with their spouse. They may prepare a statement of affairs to show the current value of their assets and liabilities, so that they can negotiate a fair settlement.
In both examples, the statement of affairs is used to show the current financial situation of the company or individual, and to help make important financial decisions.