Explain the different forms of ownership in relation to the owner’s equity section of the sole trader in the statement of financial position and the shareholder’s section of ta public company’s statement of financial position?
The owner’s equity section in the statement of financial position of a sole trader is relatively simple compared to that of a public company. This is because sole traders only have one owner and do not have shareholders. The owner’s equity section of a sole trader’s statement of financial position shows the amount of assets that the owner owns outright after all liabilities have been deducted. These assets include the owner’s initial investment in the business, retained earnings, and any profits or losses the business has earned over time.
On the other hand, a public company has many shareholders who own a portion of the company’s assets in the form of shares. The shareholder’s section of a public company’s statement of financial position shows the total value of the shares issued by the company, any dividends that have been paid, and any retained earnings that the company has accumulated. The shareholders’ equity section also shows any changes in equity that have occurred during the year as a result of stock issuances, repurchases, or changes in the value of assets.
In summary, the owner’s equity section in the statement of financial position of a sole trader shows the assets owned by the single owner of the business, while the shareholder’s section of a public company’s statement of financial position shows the value of shares owned by the company’s multiple shareholders.