A sole trader is a business owned by one person. With a sole trader, the business is not a separate legal entity. This means that the owner has full liability in his personal capacity for debt of the business in their personal capacity. The owner contributes capital to the business at his own digression and this is means that the capital contribution to the business is limited to the capacity that the owner can contribute capital. The capital is debited to an account call Capital Contribution. The net profit at the end of the year is transferred to the Capital Contribution. The owner is taxed in his personal capacity for the net profit of the business; the business itself is not taxed. A sole trader does not have to prepare financial statements for independent, external auditing.
A partnership is a form of ownership that comes into being as a result of an agreement by between two and fifty partners where each partner contributes money, assets, skill or a combination of these. A partnership is funded by the capital contributed by each of the members. A partnership is not regarded as a separate legal entity and therefore the partners are jointly and separately responsible in their personal capacity for the debts of the business. In addition to the ledger accounts of a sole trader, partnerships have a few additional accounts. Each partner has their own capital, drawings and salary account. Current accounts for each partner, interest on capital, the appropriation account are account...
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...be registered and hence are not an option in this situation
The annual reporting should be in the form of audited and published annual financial statements of the company. These financial statements have to be audited by an independent auditor at the end of the year. The annual financial statements should include the independent auditor’s report, director’s report, income statement, balance sheet and cash flow statement. These financial statements should be supported by notes to the financial statement, statement of changes in equity, statement of accounting policies used, remuneration committee’s report and the audit committee’s report. Additional information that is not required but that can also be included are financial indicators, JSE figures, reports by the chairman, CEO or CFO, corporate governance report, environmental report amongst others .
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