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Accounting Treatment - Sole Trader

  • 28-03-2011 11:20am
    #1
    Corcie
    Closed Accounts Posts: 4 ✭


    Hi

    I was just reading through boards and came across this. Im recently qualified and just wondering if someone can clarify what rules do apply so for a sole trader?

    How do you know when you should use FRS's or IAS's?

    Great forum!


Comments

  • #2
    hivizman
    Registered Users, Registered Users 2 Posts: 1,163 ✭✭✭hivizman


    Corcie wrote: »
    Hi

    I was just reading through boards and came across this. Im recently qualified and just wondering if someone can clarify what rules do apply so for a sole trader?

    How do you know when you should use FRS's or IAS's?

    Follow this link for a helpful summary of the current situation and recent proposals for Irish companies. Basically, companies with securities traded on a regulated capital market in the European Economic Area must produce financial statements under IFRS/IAS. Other companies may choose to follow IFRS, but otherwise they must follow Irish company law and applicable accounting standards, which are the accounting standards issued by the Accounting Standards Board (Financial Reporting Standards - FRS/SSAPs).

    However, the term "sole trader" usually refers to an individual who is carrying on an unincorporated business, so a sole trader would not be subject to the Companies Act. Hence sole traders are not required to use either IFRS or FRS. That said, it is useful to consult these standards as a guide to "generally accepted accounting principles", but for financial reporting purposes sole traders can prepare their financial statements in whatever way they want. In practice, though, a sole trader will prepare financial statements (or have them prepared by an accountant) either to give the trader an overview of how the business has performed during the year and the financial position at the end of the year, or to provide information for lenders and creditors, or for the tax authorities. Lenders are likely to require such accounts to be prepared in accordance with generally accepted accounting principles, while the taxman has his own rules for determining taxable profit.


  • #3
    Corcie
    Closed Accounts Posts: 4 ✭Corcie


    Thanks Hivizman I will have a look at that link also


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