Traders vs. Companies: No Dividends for Sole Proprietors

Steps:

• Identify trader as a sole proprietor or partnership without shareholders.
• Review financial statements: income statement shows revenues/expenses from trading; balance sheet shows assets/liabilities.
• Eliminate items typical in trader accounts: overdrafts (liabilities), interest (income), disposal losses (expenses).
• Confirm dividends as corporate profit distribution, absent in trader statements.

Why B is correct:

• Under accounting standards (e.g., IFRS/IAS 1), dividends paid represent profit appropriation to shareholders in companies; traders treat all profit as owner's draw, not dividends.

Why the others are wrong:

• A: Bank overdraft is a current liability on the balance sheet.
• C: Interest received is other income on the income statement.
• D: Loss on disposal of machinery is an expense reducing profit on the income statement.

Final answer: B