The Owner's equity section of a sole trader's Balance Sheet (assuming that a Statement of Changes in Equity is not used)would consist of:
A)Share capital,asset revaluation reserves and retained earnings
B)Capital invested,plus net profits,less drawings
C)A combination of A and B
D)None of the above

Question

Quizplus · Accepted Answer

As a sole trader, there are no share capital or asset revaluation reserves as there are no other shareholders. Therefore, the owner's equity section would only include the capital invested by the owner, plus any net profits earned over time, less any drawings taken out by the owner. This is commonly referred to as the "owner's capital" section and represents the portion of the business that the owner owns outright.

The Owner's Equity Section of a Sole Trader's Balance Sheet