The difference between the financial statements of a sole trader and a partnership is
A)there is no difference
B)sole trader financial statements are more complex
C)partnership balance sheets have more than one capital account
D)partnership financial statements must be prepared according to the AASB accounting standards

Question

Quizplus · Accepted Answer

Partnership balance sheets have more than one capital account as each partner has a separate capital account which reflects their investment in the partnership, their share of profits or losses, and any drawings they have taken. In contrast, a sole trader has only one capital account which reflects their investment in the business, their drawings, and any profits or losses. Option A is incorrect as there are differences in the financial statements of sole traders and partnerships. Option B is incorrect as sole trader financial statements are generally less complex than partnership financial statements. Option D is also incorrect as both sole traders and partnerships must comply with AASB accounting standards.

The Difference Between the Financial Statements of a Sole Trader