1. what is the difference between sole proprietorships and partnerships?briefly 2. what is the components balance...

1. what is the difference between sole proprietorships and partnerships?briefly

2. what is the components balance sheet and the income statement

Expert Solution

1. Sole proprietorships is formed by one single person whereas partnership is form by 2 or more person. In sole proprietorships all the profits and losses belongs to the proprietor and he is the only one contributing capital in the firm. In partnership the profits and losses are divided between each of the partners based on their proportion share. All the partners contribute to the capital of the firm. The sole proprietor alone takes all the decision and has full charge on the business whereas in partnership the decisions are taken by all the partners and therefore the charge of the firm is divided between each of them. The liability in sole proprietorship is of the proprietor alone whereas in partnership each of the partners are also liable for the partnership. There is possibility of difference of opinion in partnership whereas no such issue arises in sole proprietorship.

2. Balance sheet is one of the financial statement of the company which shows the financial position of the company as on date. Balance sheet consists of assets, liabilities and equity part. The assets and liabilities are further divided into current and non current. The assets which are held for less than one year and liabilities which are due within one year are classified as current whereas assets which are held for more than one year and liabilities which are due beyond one year are classified as non current. The equity or capital consists of the capital contributed by the owners and also includes the net income accumulated.

Income statement is also one of the financial statement which shows the net income or loss earned by the company. It consists of revenue and expenses of the business. The revenue and expenses are classified as operating and non operating. Operating related to business operation and non operating relates to finance or investing activities. The excess of revenue over expense is termed as net income whereas excess of expense over income is termed as net loss. The higher the net income, better is the company's performance.

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