Financial statements

Question 1

What components of the financial statements have sole trader/ partnership?

Answer 1

• Profit and loss account / Statement of profit and loss
• Balance sheet/ Statement of financial position

Question 2

What components of the financial statements have company?

Answer 2

They are regulated by IAS1
- Statement of profit or loss (shows profitability)
- Statement of financial position (shows assets/ liabilities)
- Statement of changes in equity (shows changes in the position of the equity)
- Statement of cashflows (shows the cash flows in the business)
- Notes to the financial statements = explain the statements above

Question 3

What is the main difference between SOFP for Sole traders/ partnership vs company?

Answer 3

How the business is funded

Question 4

How does sole trader finance their business?

Answer 4

They inject their own capital.

Question 5

What is the proprietor’s interest section in SOFP?

Answer 5

Sole traders capital
Capital + profit - drawings = proprietors interest

Question 6

What is equity?

Answer 6

share capital + retained earnings + other reserves = equity for a limited company