1. Sole proprietorship is the form of business organizational that the easiest to establish.
2. On a financial basis, its establishment requires only a small capital that can be obtained from personal savings or loans.
3. In terms of the law, the procedure of establishment is not complicated. 4. Such business is owned by one owner.
5. The business is managed and controlled by the owner with the help of his family members or a few shop assistants.
6. Sole proprietors will be able to enjoy all the profits and be forced to bear all business risks. Business liability is unlimited.
7. This form of organization usually consists of retail outlets, distributors, hawkers, small business services such as tailors, beauty salons, hairdressers, laundry shops, electrical appliance repair shops, and professional services such as clinics, law firms, and accountants. In addition, most of the farmland, agriculture, and fisheries also managed by a single owner.
Sole Proprietorship Account
1. According to the concept of a separate entity, business and business owners are two separate entities (parties). Owner’s personal transactions must be separate from business transactions.
2. Two accounts are opened to record transactions between owners and businesses, ie
a) Capital account that records:
i) additional capital / investment of the owner into the business in the form of assets
ii) operating results at the end of the accounting period either net profit or net loss
iii) the owner’s total take-over (transferred from the Takeout Account) b) Takeout Account
Records cash withdrawals (cash and checks, take-up of goods, and take up business fixed assets for their own use.) (Total Takeout Accounts are transferred to the Capital Account at the end of the accounting year.)