Which of the following is a characteristic of sole trader accounts?
Practice Questions
1 question
Q1
Which of the following is a characteristic of sole trader accounts?
Separate legal entity
Unlimited liability
Complex reporting requirements
Limited access to capital
Sole traders have unlimited liability, meaning they are personally responsible for all debts of the business.
Questions & Step-by-step Solutions
1 item
Q
Q: Which of the following is a characteristic of sole trader accounts?
Solution: Sole traders have unlimited liability, meaning they are personally responsible for all debts of the business.
Steps: 4
Step 1: Understand what a sole trader is. A sole trader is a person who runs their own business and is the only owner.
Step 2: Learn about liability. Liability means being responsible for something, especially debts.
Step 3: Know what unlimited liability means. Unlimited liability means that if the business owes money, the owner has to pay it back with their own money.
Step 4: Realize that in sole trader accounts, the owner is personally responsible for all the business's debts. This is a key characteristic of sole trader accounts.
