Difference Between Conversion Method And Net Worth Method

Conversion Method is a method of Single Entry System in which we convert the basis of preparing Books of Accounts into the basis of Double Entry System while in Net Worth Method, we remain under the single system and prepare books of accounts in order to calculate profit and loss of the business for the accounting period.

Net worth method is also called balance sheet approach as we find out net worth’s value of Capital during the year in order to get the information about the profitable activities of the business. That is whey this method is also called Increased Net Worth Method. Conversion method is simply a system of transferring the Single Entry System into Double Entry System in order to prepare Trial balance, Income Statement, balance Sheet and other financial statements of the business for the accounting period.