Understanding accounting and accountability for sole traders Suzie Angles is a plumber working…
Understanding accounting and accountability for sole traders Suzie Angles is a plumber working for herself. She is a sole trader. For what purposes might Suzie need accounting? Suzie will need accounting to inform her about:
• financial costs
• financial income
She will need to know about the financial resources she has, as well as to whom she owes funds, and who owes her funds. She will also need to know whether she will be able to pay her debts as and when they become due, as well as how much cash can be withdrawn from the business without impacting its ability to keep operating. To whom is a sole trader accountable? Suzie is accountable to herself, as she needs to ensure that she is able to pay her own bills. To the extent that she has borrowed funds from external organisations, such as banks, she will also be accountable to these organisations. Because it is necessary to lodge tax returns, the business is also accountable to the tax authorities. The focus of a sole trader is typically on financial aspects of performance (both past and projected performance) rather than on the social or environmental impacts of the business. As Suzie’s organisation is relatively small (likely just herself), its social and environmental impacts will be similarly small. That is not to say that Suzie does not care about these factors, but it is unlikely that she will be expected to report upon them.