1. What are the Forms of Business Organizations?

Explain

There are three basic forms of business organizations i.e. Sole Proprietorship, Partnership,
and Joint-Stock Corporation.

Sole Proprietorship: This form of business organization is owned and controlled by a single
person, no legal formalities are involved in setting up this type of business and only single person
is responsible for all the profits and losses. The advantages are that it is easy to set-up this type of
business and any accounts that are prepared are only provided to the owner and the tax authority.
The disadvantages include difficulty in raising finance and unlimited liability which means that
creditors can go after personal assets of the owner in case the business is not able to pay the debt.
Partnership: Mostly similar to sole proprietorship except that there two or more owners. The
problem of raising more finance for the business is addressed as more owners have access to more
capital. In general partnerships the partners are jointly responsible for the profits and debts of
business. If the business itself is not able to meet the debts of business then the owners will have
to jointly pay from their personal resources. In limited partnerships the limited partners may not
be responsible in case of loss.
Joint-Stock Corporation: It is a business unit and voluntary association of persons created by
law and it has a separate legal personality. Its owners are called shareholders who do not directly
control the corporation’s operations however they appoint directors to manage the business. The
shareholders of such type of business have limited liability, which means that their risk of loss is
only limited to the amount they paid for their shares and not their personal assets.
A. What are the Seven Basic Steps of the Accounting Cycle?
The accounting cycle is a series of steps whose ultimate goal is to provide useful information to
decision makers. These steps are as follows:

1. Analyze business transactions from source documents.

2. Record the transactions by entering them in the general journal.
3. Post the journal entries to the ledger.
4. Prepare a trial balance.
5. Adjust the accounts, and prepare an adjusted trial balance.
6. Prepare financial statements.
7. Close the accounts, and prepare a post-closing trial balance.