BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The liability is unlimited
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It is owned by one person
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The capital is contributed by the owner
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The financial statements need to be audited
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Detailed explanation-1: -A sole trader is a business owned by one person. They are usually small in size. Hairdressers, butchers, and electricians often operate as sole traders. Sole traders rely on their own savings, bank loans or loans from friends and family to finance their business.
Detailed explanation-2: -The sole trader financial statements are the balance sheet, the income statement, statement of change in owner’s equity and the statement of cash flows.
Detailed explanation-3: -Public Company. All public companies must undergo an independent audit every year. This ensures that the financial statements released by the company accurately reflect its operations.
Detailed explanation-4: -Limitations of Sole Proprietorship Accounting If the owner of a sole proprietorship wants to obtain funding for his or her business, the lender will likely require audited financial statements, which will require the following sequence of actions to upgrade the accounting records: Form a business entity.