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As Accounting Unit 2 Revision Studyguide.pk

As Accounting Unit 2 Revision Studyguide.pk

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Bought to you by www.studyguide.pkAS- Level Accounting Unit 2 RevisionNotes
Benstead Revision Notes:Types of Business Organisation:
Sole Traders:Advantages:
 
Faster decision making
 
Independence
 
Quicker and cheaper to establish
 
All profits belong to the sole trader
 
Competitors know less about the business’s success as theaccounts don’t have to be published
 Disadvantages:
 
Unlimited liability-can lo
se both business’s assets
and their ownpersonal possessions.
 
Capital is limited to the wealth of one individual. May limit business growth.
 
Have to work long hours and have poor holidays and rewards
 
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May feel isolated
 
Ownership cannot be changedPartnerships:Advantages:
 
More access to finance as there are more people to contribute
 
More skills and expertise
 
Management and responsibilities shared
 
Workload and ideas can also be shared between partnersDisadvantages:
 
Unlimited liability
 
Profits or debts shared
 
More difficult decision making as all partners have to agree
 
Partnerships can be short lived due to death, retirement orwithdrawal
 
More complicated, expensive and time consuming to set up thansole tradersLimited Liability companies-both PLC and LTD:Advantages:
 
Limited liability-owners can only lose what they invest 
 
Can raise large amounts of finance through the selling of shares
 
Separate legal entity to owners meaning that ownership can changes
 
Ideas and be sharedDisadvantages:
 
Complicated to establish-lots of legal requirements
 
Annual accounts have to be sent to the registrar of companies
 
People who originally establish the company can lose control aswhoever owns 50+%of shares with voting rights controls thecompany
Accounting Concepts (BOGCRAMP):
 
B
usiness Entity-only information relevant to that business must berecorded. Not any personal uses.
 
O
bjectivity-Factual information only must be recorded in the businessaccounts.
 
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G
oing Concern-Assumes that the business will continue to trade for the foreseeable future. 
 
C
onsistency-requires that the business applies the same policies andprocedures from one year to the next. E.g. depreciation. 
 
R
ealisation-Money should only be recorded when it is certain that it willbe received. 
 
A
ccruals-Money, payments and receipts are matched for a time periodwhen recording profit. 
 
M
ateriality-Only record significant 
expenses, e.g. paper clips wouldn’t 
be recorded. 
 
P
rudence-where there is doubt in the value of Assets, or the level of profit, the lower value must always be used. This makes sure that profit is not overstated.Further Aspects of the Preparation of the Final Accounts and Balance Sheetsof Sole Traders:
Sole Trader Income Statement Layout:
XXX Income statement for the year ending XXX
SalesLess Cost of Sales
Opening stockPurchasesLess closing stock
Gross ProfitOther IncomeLess Expenses:
Rent WagesRatesAdvertisingInsuranceMotor Expenses

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