Differences between the formats of financial statements for different types of business such as sole proprietor, partnership and

limited company There are different kind of business organization, such as sole proprietorship, partnership and limited company. Therefore, the characteristic of each business organization is also different; it will lead to difference about format of financial statements. Therefore, it is necessary to understand about these business organizations, from that we can know difference formats of financial statement that they use.
1

A sole proprietorship also known as a sole trader, or simply proprietorship is a type

of business entity which is owned and run by one individual and where there is no legal distinction between the owner and the business. All profits and all losses accrue to the owner (subject to taxation). All assets of the business are owned by the proprietor and all debts of the business are their debts and they must pay them from their personal resources. This means that the owner has unlimited liability. Partnership is a company that set up by more than two people, partners contributes their money to run business, so that partners (owners) share with each other the profits or losses of the business. Partnerships are often favored over corporations for taxation purposes, as the partnership structure does not generally incur a tax on profits before it is distributed to the partners. Limited company is a corporation with shareholders whose liability is limited by shares (Ltd), which is the most common form of privately held company. Setting up as a limited company is an attractive option for many people as, unlike sole traders, personal assets are completely distinct from company finances. In order to make clear about difference formats of financial statements. below are some example formats that is used by difference business organization.

http://en.wikipedia.org/wiki/Sole_proprietorship

Sole proprietor

Income statement2
$

Sales 159,270 Cost of sales -90,875 Gross profit 68,395 other income: interest income 2,356 Operating expenses: Accountancy fee 800 Depreciation of property 2,500 Donation 500 Electricity and water 3,340 insurance premium 2,000 printing 1,697 rental of premises 12,000 salaries 35,579 upkeep of office 3,547 telephone charges 1,285 2 http://learnaccounting.wordpress.com/2007/12/21/three-most-common-types-of-small-businessestraveling 2,648 %E2%80%93-sole-proprietorship-partnership-and-private-limited-company/sole-proprietor-example-of65,896 income-statement-and-balance-sheet/ Net profit for the year 4,855 Retained profits B/F 27,654 Retained profits C/F 32,509 2

Balance sheet3

http://learnaccounting.wordpress.com/2007/12/21/three-most-common-types-of-small-businesses%E2%80%93-sole-proprietorship-partnership-and-private-limited-company/sole-proprietor-example-ofincome-statement-and-balance-sheet/

$ Non current assets Property, plant and equipment Current assets Inventories Trade receivable Other receivable Cash and bank balances 15,000 5,200 6,000 3,458 10,639 25,297 Current liabilities Trade payable Other payable Net current assets Finance by: Capital Retained profit Net drawing 3,588 2,575 6,163 19,134 34,134 15,000 32,509 13,375 34,134

Partnership

Income statement

Balance sheet

Limited company

Income Statement
2009 $'000 11,200 8,460 465 360 80 15 12 2008 $'000 9,750 6,825 320 280 60 9 10

Sales Cost of sales Net profit before tax This is after charging: Depreciation Loan note interest Interest on bank overdraft Audit fees

Balance sheet
$'000 ASSETS Non-current assets Current assets Inventory Receivables Cash TOTAL ASSETS EQUITY AND LIABILITIES Equity Ordinary share capital Retained earnings Non-current liabilities 10% loan stock Curent liabilities Bank overdraft Payables Taxes TOTAL EQUITY AND LIABILITIES 800 1,310 800 930 2009 $'000 1,850 640 1,230 80 490 1,080 120 2008 $'000 $'000 1,430

1,950 3,800

1,690 3,120

2,110

1,730

800 110 750 30 80 690 20

600

890 3,800

790 3,120

The difference between the formats of The Income statement:

Income statement of a company that includes profit and loss appropriate account that do not has in income statement of partnership and sole proprietor. Besides, in a limited company, its net profit for the year is used to pay tax; to pay dividends and for retention within the business. This factor is different from sole proprietorship. With partnership, the division of the net profit among the partners has to be shown; this element is not showed in sole proprietorship, and limited company. Besides, partners' salaries and interest on capital are not charges in the main part of the Income statement. They are simply part of the process of dividing up the profit among the partners. The differences between the formats of balance sheet

The balance sheet of partnership that is a separate capital account for each partner, but in the balance sheet of sole proprietorship is not separate. As regards partnership, the capital account is used to show the stake of the partner. For a sole trader, the profit or losses each year are often transferred into capital account, so that the bottom of balance sheet would simply have one line. Example: Capital 15000

In company, the owners are shareholder, whose initial stake is shown as share capital and subsequent profit earned showed as a balance on the profit and loss account.