Help to imaginery figure prepare journal ledger trial balance and final account of sole trader
Answers
Sole traders are people who are in business on their own: they run shops,
factories, farms, garages, local franchises, etc. The businesses are generally
small because the owner usually has a limited amount of capital to invest.
Profits are often small and, after the owner has taken out drawings, are usually
ploughed back into the business.
People set up as sole traders for various reasons:
■ the owner has independence and can run the business, by and large,
without the need to involve others in decision making
■ in a small business with few, if any, employees, personal service and
supervision by the owner are available at all times
■ the business is easy to establish legally – either using the owner’s name,
or a trading name such as ‘Wyvern Plumbing Services’
The disadvantages of a sole-trader business are:
■ the owner has unlimited liability for the debts of the business – this means
that if the sole trader should become insolvent (unable to pay debts when
they are due), the owner’s personal assets may be sold to pay creditors
■ expansion is limited because it can only be achieved by the owner
ploughing back profits, or by borrowing from a lender such as a bank
■ the owner usually has to work long hours and it may be difficult to find
time to take holidays; if the owner should become ill the work of the
business will either slow down or stop altogether