Sole Proprietorship Meaning: Sole Proprietorship is a situation where only a single person manages the affairs of the whole business. The single person alone manages, owns, finance, controls and look after the entire business activities. The owner of such a business is known as a Proprietor. The owner alone is responsible for all the profits earned and losses incurred by the business. The owner invests the capital in the business from his/her own funds or he/she may resort to borrowings as well.
The sole proprietor has an advantage in the sense that he/she is not required to face many legal formalities to initiate, control and dissolve the business. The proprietor can easily and quickly establish his/her own business. The main aim of any sole proprietorship business is to earn profits. In order to ascertain the profits earned during the year, the proprietor prepares the financial statements.
Revenue Income: Revenue incomes are those incomes that are earned in the conduct of ordinary and day-to-day business activities.
Capital incomes are those incomes that do not arise in the normal course of business operations. Such incomes arise from the capital itself, without involving any production work. For example, the premium received from the issue of shares or debentures.
The capital loss is made good or settled against the capital profits. In case the amount of capital losses is more than the capital profit, then the excess amount is shown on the Assets side