Tech Startup Growth Hacking 101 - Basics on Growth Marketing
Financial Accounting Lecture on Business Entities and Forms
1. Financial Accounting
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Lecture – 31
Different Business Entities
• Commercial Organizations
Sole proprietorship
Partnership, and
Limited Company
• In commercial organizations profit is distributed among the
owners of the business.
2. Financial Accounting
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Different Business Entities
• Non-Commercial Organizations
Co-operative institutions
NGO’s
Trusts
• In non-commercial organizations profit is not distributed but
is used for the objective of the organization.
3. Financial Accounting
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Lecture – 31
Sole Proprietorship
• Sole Proprietorship is a business owned and run by an
Individual called Proprietor / Sole Proprietor.
• It is the simplest form of business.
4. Financial Accounting
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Lecture – 31
Partnership
• Partnership is a business owned and run by more than one
persons called Partners.
• There can be a maximum of 20 partners.
5. Financial Accounting
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Lecture – 31
Partnership
• Partners in a partnership business are Jointly and Severally
liable for repayment of partnership’s liabilities.
• The liability of the partners is Unlimited.
6. Financial Accounting
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Lecture – 31
Limited Companies
• The liability of the owners is limited to the extent of funds
invested by them in the company.
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Journal Entries for Drawings Account
• Cash Drawn by Proprietor
Debit Proprietor’s Drawing
Credit Cash
• The balance in drawings account is transferred to Capital
Account at the year end.
8. Financial Accounting
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Lecture – 31
Sole Proprietor – Capital Account
Capital Account
Debit Side Credit Side
Date No Narration Dr. Rs. Date No Narration Cr. Rs.
Jun 30 Drawings 45,000 Jul 01 Balance B/F 100,000
Jun 30 P & L Account 50,000
Jun 30 Balance C/F 105,000
150,000 150,000
NOTE – height of the rows should be more than the font size.
This improves visibility on TV.
9. Financial Accounting
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Lecture – 31
Sole Proprietor – Capital Account
Capital Account
Debit Side Credit Side
Date No Narration Dr. Rs. Date No Narration Cr. Rs.
Jun 30 P & L Account 10,000 Jul 01 Balance B/F 100,000
Jun 30 Drawings 45,000
Jun 30 Balance C/F 45,000
100,000 100,000
10. Financial Accounting
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Lecture – 31
Balance Sheet - Sole Proprietor
Name of Business
Balance Sheet As At ----
Particulars Amount Rs. Amount Rs.
ASSETS
Fixed Assets
Long Term Assets
Current Assets
X
X
X
TOTAL X
LIABILITIES
Capital
Add: Profit / Loss For The Year
Less: Drawings
X
X
(X) X
Long Term Liabilities X
Current Liabilities X
TOTAL X
11. Financial Accounting
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Lecture – 31
Partnership – Capital Accounts
• Fixed Capital Account
In this case capital account shows movement in capital
only i.e. actual increase or decrease in capital, by
partners.
Other transactions such as Drawings and Profit etc. are
not recorded in capital account
• Fluctuating Capital Account
In fluctuating capital account all transactions relating to
partners are recorded in capital account.
12. Financial Accounting
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Lecture – 31
Partnership – Current Accounts
• Fixed Capital Account
In case of fixed capital accounts other transactions such
as Drawings and Profit etc. are recorded in a separate
account called Current Account.
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Lecture – 31
Partnership – Journal Entries
• Capital Introduced by Partner
Debit Cash / Bank
Credit Partner’s Capital Account
Separate capital account is opened in general ledger for
each partner.
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Lecture – 31
Partnership – Journal Entries
• Drawing by Partner
Debit Individual Partner’s Current Account
Credit Cash / Bank
• Excess Drawn Amount Returned by Partner
Debit Bank / cash
Credit Individual Partner’s Current Account
• Profit Distribution
Debit Profit and Loss Appropriation Account
Credit Partner A’s Current Account
Credit Partner B’s Current Account
Credit Partner C’s Current Account
15. Financial Accounting
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Lecture – 31
Balance Sheet - Partnership
Name of Business
Balance Sheet As At ----
Particulars Amount Rs. Amount Rs.
ASSETS
Fixed Assets
Long Term Assets
Current Assets
X
X
X
TOTAL X
LIABILITIES
Capital A
B
C
X
X
X X
Current Account A
B
C
X
X
X X
Long Term Liabilities X
Current Liabilities X
TOTAL X
16. Financial Accounting
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Lecture – 31
Limited Companies – Number of Shareholders
• Private Limited Company
Two to fifty persons can form a private limited company.
Minimum two members are elected to form a board. This
board is given the responsibility to run day to day
business of the company.
17. Financial Accounting
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Lecture – 31
Limited Companies – Number of Shareholders
• Public Limited Company
Minimum Seven persons can form a public limited
company.
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Limited Companies – Shareholders
• Capital of the company is divided into small units /
denominations. These units / denominations are called
shares.
• Owners purchase these shares and are therefore called
shareholders.
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Lecture – 31
Limited Companies – Shareholders
• Capital of the company is divided into small units /
denominations. These units / denominations are called
shares.
• Owners purchase these shares and are therefore called
shareholders.