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Doc Introduction To Accounting Essay

2521 words - 11 pages

Table of contains

Contains pages
Executive summary
Introduction……………………………………………………………………………………………….3
1. The different types of business units:
a) Sole proprietorship………………………………………………………………………..4
b) Partnership……………………………………………………………………………………5
c) Private limited company………………………………………………………………..6
d) Public limited company………………………………………………………………….6
2. Difference between ,Financial accounting and
Management accounting:

a) Nature of report…………………………………………………………………………….6
b) Details level……………………………………………………………………………………7
c) ...view middle of the document...

From a legal point of view, there are three common forms of business structures classified as: incorporate and unincorporated. Every single structure has diverse and fundamental effects for liability, succession and taxation.
Introduction
This report will be divided in three main parts. The first part will focus on diverse forms of business units available: sole proprietorship, partnership, limited company such as private limited company and public limited company; the advantages and limitations associated on each will also be provided. The second part will discuss the difference between financial accounting and management accounting which are the main branches of accounting and finally in the third part the sources of finances available to a business owner, making distinction between internal sources and external sources, short and long term sources, equity and debt will be provided.
1. Different forms of business unit
a) Sole proprietorship
‘’a sole proprietorship operates a business herself or himself, keeping any profit which are made after deducting tax’’ (Gowthorpe, 2011, pp.3).This form of business is well known as self-employed, it is a simplest structure to set-up in the United Kingdom law. There is no legal distinction between owner and a business. You are personally responsible for any debts and obligations that you make.you retain all your business profits after you have paid tax on them.
A creditor with claim against a sole trader would have the right against his assets whether personal or business because the business owner suffer from unlimited liability.
A sole trader has tax responsibilities ,every year ,the sole trader must send a self-assessment tax return ,pay income tax on the profits that make the business, pay national insurance contributions( you required to register for vat if you expect your takings to be more than £, 81,000 a year (http//:www.gov.co.uk.org).
b) Partnership (partnership act 1890)
Is an agreement or type of business entity in which two or more people trade under partnership with a view of profit.
There are two types of partnership: General (act 1890) and Limited liability partnership (act 2000).In general partnership, two or more business owners are personally liable for the obligations and debts of the firm, each partner assume the consequences resulting of actions or negligence of others partners. The main advantages of this are partners enjoy privacy regarding their profits and accounts, partners are also taxes individually by contrast in limited liability partnership, the organisation has a legal individuality separated from its members, liability is usually limited to the capital they have agreed to invest however they still liable for negligence as all members are responsible of running the business. In both types, partners enjoy complimenting of ideas and skills for the business interest, they can also can raise a huge amount of capital.
Every members will be assessed to tax on their...

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