1
Forms of Business
Organization
Main Points:
1. Sole Proprietorships
1) Advantages of Sole Proprietorships
2) Limitations...
2
Revision (1)
1. What is bookkeeping?
-- a process of accounting, the means of recording
transactions and bookkeeping rec...
3
Revision (2)
3. Who are the users of accounting information with
direct financial interest?
-- present and potential inv...
4
Presentation
Accountants need to understand the
three basic forms of business organization:
sole proprietorships, partne...
5
In-class Activities (3-2)
Advantages:
1. Sole proprietorships
1) simplicity and flexibility;
2) unrestricted involvement...
6
In-class Activities (3-2)
Advantages:
3. Corporations
1) continuous existence;
2) ease of transferring ownership;
3) les...
7
In-class Activities (3-3)
Disadvantages:
1. Sole proprietorships
1) permanent risks in both personal and business activi...
8
In-class Activities (3-3)
Disadvantages:
3. Corporations
1) more time and money needed for incorporation;
2) negative in...
Upcoming SlideShare
Loading in …5
×

Forms of business organisation

727 views

Published on

Published in: Business, Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
727
On SlideShare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
7
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Forms of business organisation

  1. 1. 1 Forms of Business Organization Main Points: 1. Sole Proprietorships 1) Advantages of Sole Proprietorships 2) Limitations of Sole Proprietorships 2. Partnerships 1) Advantages of Partnerships 2) Limitations of Partnerships 3. Corporations 1) Advantages of Corporations 2) Limitations of Corporations
  2. 2. 2 Revision (1) 1. What is bookkeeping? -- a process of accounting, the means of recording transactions and bookkeeping records. 2. What is accounting? 1) (AICPA) the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events, and interpreting the results thereof. 2) (Modern Definition) an information system that measures, processes, and communicates financial information about an identifiable economic entity. 3) (Encyclopedia) the process of maintaining, auditing, and processing financial information for business purposes.
  3. 3. 3 Revision (2) 3. Who are the users of accounting information with direct financial interest? -- present and potential investors; present and potential creditors; management. 4. Who are the users of accounting information with indirect financial interest? 1) tax authorities 2) other groups -- financial analysts and advisers, brokers, lawyers, economists, and the financial press; -- customers and the general public.
  4. 4. 4 Presentation Accountants need to understand the three basic forms of business organization: sole proprietorships, partnerships, and corporations. Accountants should recognize each form as an economic unit separate from its owners, although legally only the corporation is considered separate from its owners.
  5. 5. 5 In-class Activities (3-2) Advantages: 1. Sole proprietorships 1) simplicity and flexibility; 2) unrestricted involvement of family members. 2. Partnerships 1) ease of assembling enough financial and physical resources; 2) greater borrowing capacity than the total borrowing capacity of the partners as individuals; 3) relatively unlimited involvement of family members; 4) simple record-keeping and income tax filing requirements.
  6. 6. 6 In-class Activities (3-2) Advantages: 3. Corporations 1) continuous existence; 2) ease of transferring ownership; 3) less risk of unrecognized equity liquidation; 4) separate legal entity; 5) limited liability of stockholders; 6) ease of raising capital; 7) lack of mutual agency; 8) centralized authority and responsibility; 9) professional management.
  7. 7. 7 In-class Activities (3-3) Disadvantages: 1. Sole proprietorships 1) permanent risks in both personal and business activities; 2) severely restricted credit availability and business opportunities; 3) difficulty in measuring financial performance and profitability. 2. Partnerships 1) essential description of the method of distributing profits and losses; 2) unlimited liability; 3) lack of understanding the financial position of the partnership; 4) limited life; 5) unequal treatment to minority partners.
  8. 8. 8 In-class Activities (3-3) Disadvantages: 3. Corporations 1) more time and money needed for incorporation; 2) negative influence of the requisition of personal guarantees on the limitation of liability; 3) obstruction in decision making caused by conflicts and disagreements among stockholders; 4) difficulty of recovering the value of the investment for minority stockholders; 5) more paperwork to prepare; 6) taxed twice income.

×