Sole trader formula
Accounting Equation for a Sole Proprietorship: Transactions 1-2. We present nine transactions to illustrate how a company's accounting equation stays in balance. When a company records a business transaction, it is not entered into an accounting equation, per se. Rather, transactions are recorded into specific accounts contained in the company's general ledger. A sole proprietorship, also known as the sole trader, individual entrepreneurship or proprietorship, is a type of enterprise that is owned and run by one person and in which there is no legal distinction between the owner and the business entity. A sole trader does not necessarily work 'alone'—it is possible for • Sole traders and their owners are one legal entity • But two economic entities; we keep their accounts separate • The company belongs to the owner who is responsible for its assets and liabilities • The company may be registered for VAT but the owner cannot claim back VAT for personal purchases or costs