Organizational Structure Running A Successful Business
Financial accounting
1.
2.
What is Finance?
1) Money & Capital markets.
which deals with securities markets & financial
institutions.
2) Investments..
Finance is the science of managing financial resources in
an optimal pattern i.e. the best use of available financial
sources. Finance consists of three interrelated areas:
which focuses on the decisions of both individual and
institutional investors as they choose assets for their
investment portfolios.
3) Financial Management or business finance.
which involves the actual management of firms
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3.
Accounting:
It is and art of identifying, recording,
communicating and relevant reliable and
comparable business information.
Identify
Evidence
Voucher
Document
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5.
It is the maintenance of daily record of All financial
transactions in such a manner that it would help in
the preparation of suitable information regarding the
financial affairs of a business or an individual.
Why is Financial Accounting needed?
The need for recording financial transactions arises
because the individual or business wants to know
the performance of the business and to assist the
person in making decisions related to the business.
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6.
Profit oriented or commercial entities are those
entities where the main aim of carrying out
business is to earn profit for the owners of the
business. Profit oriented entities are of
following types:
Sole Proprietorship
Partnership
Companies
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7.
Sole Proprietorship
It is an unincorporated business owned by one
individual. Going into a business as a sole proprietor
is simple
– one merely has to begin business operations.
Proprietorship consists of 80% of the total number of
businesses worldwide.
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8.
It is easily & inexpensively formed.
It is subject to few government regulations.
The business pays no corporate income tax;
only personal income tax is paid by the
proprietor.
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9.
It is difficult for a proprietorship to obtain large
sums of capital.
The proprietor has unlimited personal liability
for the business debts, which can result in
losses hat exceed the money invested by him in
the business.
The life of the business organized as
proprietorship is limited to the life of the
individual who created it.
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10.
A partnership exists whenever two or more
persons associate to conduct a non-corporate
business. It could be registered or unregistered.
Advantages:
Low cost involved
Ease of formation
Limitations
Unlimited Liability.
Limited life of the organization.
Difficulty of transferring ownership.
Difficulty of raising large amounts of capital.
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11.
It is incorporates association enjoys the
advantage of heaving a large number of
members who contribute money to a common
pool for running large undertakings. The
interest or share of each member can be
purchased, sold and transferred without the
consent of other members.
(Companies Ordinance 1984)s
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12.
Non-profit oriented entities are those business
entities / concerns where the main purpose of
doing business is not to earn profits for the owners
/ sponsors.
but to provide benefit to general public or to
carryout a social cause.
Profits of a non-profit oriented entity can only be
utilized for the purpose for which the entity is
established
NGO’s
Trusts
Societies
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13.
―Company Limited by Shares" is a company in
which the liability of the members (shareholder) of
the company is limited to the amount of share
capital that they have contributed.
Section 2 (8) of the Companies Ordinance 1984
sates:
"company limited by shares‖ means a company
having the liability of its members limited by the
memorandum to the amount, if any, unpaid on the
shares respectively held by them.
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14.
Private Limited Companies
Single Member Companies
Public Limited Companies
Public Listed Companies
Public Unlisted Companies
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15.
are those companies that restrict the right of
shareholders to transfer their shares to a person
other than the existing shareholders.
If a member wishes to sell his shares he will first
have to offer the shares to the existing members. In
case, none of the existing members accepts the
shares and at the same time does not object to the
selling of the shares to an outsider only then the
shares can be sold to an outsider.
Private Limited companies use the words ―Private
Limited‖ or ―(Pvt) Ltd‖ at the end of their name.
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16.
are those companies in which there is no
restriction of transfer of shares.
There is also no limit as to the maximum
number of shareholders. However, the
minimum number cannot be less than three.
Public Limited Companies uses the words
―Limited‖ or ―Ltd‖ at the end of their name.
Public Limited Company is defined in
Companies Ordinance 1984 in Section 2 (30) as:
"Public company" means a company which is not a
private company
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17.
Companies Ordinance also permits formation
of non-profit oriented companies which means
that the company will not distribute its profits
among its share holders.
These companies have to take special
permission from SECP and are also allowed to
dispense with the phrases ―Private Limited‖ or
―Limited‖.
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18. The maximum numbers of shareholders allowed in a private
limited company is 50.
Private Limited Company is defined in Companies
Ordinance 1984 in Section 2 (28) as:
"Private company" means a company which, by its
articles,—
I.
restricts the right to transfer its shares, if any;
II.
limits the number of its members to fifty not including
persons who are in the employment of the company;
III.
and prohibits any invitation to the public to subscribe for
the shares, if any, or debentures of the company:
Provided that, where two or more persons hold one or more
shares in a company jointly, they shall, for the purposes of this
definition, be treated as a single member;
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19.
are also private limited companies but there is
only one shareholder in the company.
Before 2002 there was a limit of two for the
minimum number of shareholders in a private
limited company. However the limit was
relaxed and companies with only one member
were also allowed.
In case of a single member company two
persons are required to be nominated to
takeover the company in case of the death of
the member.
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20.
are those public companies whose shares are
traded on stock exchanges.
These are also called ―quoted companies‖.
Public Unlisted Companies
– are those public limited companies whose shares are
not traded on any stock exchange.
These are also ca lled ―public unquoted companies‖.
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