Financial Statements of a Sole Proprietorship
Accounting reports are prepared for users once the transactions have been recorded and summarized. These accounting reports provide information on various transactions in the business, and are called financial statements.
The principal financial statements of a sole proprietorship are:
- Income Statement: This is the financial statement that summarizes the profitability of a business entity for a specified period.
- Balance Sheet: This provides complete details of assets, liabilities, and owner’s equity as of a specific date (usually the last day of a month or a year).
- Owner’s Equity: This is a summary of changes in the owner’s equity that have occurred during a specific period of time, such as a month or a year.
- Statement of Cash flow: This is a summary of the cash receipts and cash payments for a specific period, such as a month or a year.
The primary financial statements are:
- Income statement
- Balance sheet