Annual financial statement in the sole proprietorship

A sole proprietorship can consist of only one person, the owner. Consequently, the business assets of other partners do not need to be considered in the annual financial statements.

At the end of the fiscal year, the following journal entries are particularly necessary:‍

Income Statement / Equity

Private / Equity

‍In the journal entry Income Statement / Equity, the profit from the income statement is essentially transferred to the balance sheet (division: equity). With the journal entry Private / Equity, the final balance of the Private account is transferred to the equity. If the Private account shows a debit surplus, the journal entry is reversed, that is Equity / Private. After that, the Private account amounts to zero and does not need to be listed in the final balance sheet anymore.