Final answer:
Sole trader accounts differ from company accounts in the UK due to unlimited liability and simpler reporting for sole traders, versus limited liability and more rigorous reporting requirements for companies.
Step-by-step explanation:
The main differences between sole trader and company accounts prepared under UK GAAP (Generally Accepted Accounting Practice) are due to the distinct legal and structural characteristics of these business forms. A sole trader, also known as a sole proprietorship, is an individual running a business on their own behalf. That individual has full control and is personally responsible for the business's debts, leading to unlimited liability. The accounts of a sole trader are generally simpler and they don't need to file accounts with Companies House.
A company, on the other hand, is a separate legal entity from its owners. Companies, particularly limited companies, have the advantage of limited liability, meaning the owners' personal assets are protected in the event of business failure. Their accounts include a balance sheet, income statement, and often a cash flow statement, and they must adhere to more stringent reporting requirements such as annual filings with Companies House. Also, companies are subject to corporation tax while sole traders are taxed on their personal income.
Differences in liabilities, tax treatment, reporting requirements, and the level of financial disclosure are chief among the contrasts between sole trader and company accounts in the UK. Sole traders typically have less regulatory burden but bear all the risks themselves, while companies afford protection but must meet more comprehensive governance and reporting standards.