FORMS OF BUSINESS ORGANIZATION OR STRUCTURE

1. Sole/ Single Proprietorship – the simplest form of business organization; only one
individual owns the business. The owner is called “sole proprietor’’. It is registered with
the Department of Trade and Industry(DTI).

2. Partnerships – an association of two or more persons to carry on as co-owners of a

business for profit. “By the contract of partnership, two or more person bind themselves
to contribute money, property or industry to a common fund with the intention of
dividing the profits among themselves’’ (Article 1767, New Civil Code). It is registered
with the Securities and Exchange Commission(SEC).

3. Corporation – to separate a body consisting of at least five individuals treated by the law
as an unit. “An artificial being created by operation of law, having the right of succession
and the powers, attributes and properties expressly authorized by law or incident to its
existence’’ (Sec.2, The Corporation Code of the Philippines). It is registered with the
Securities and Exchange Commission(SEC).

ADVANTAGES
 Easy to form, less
government requirement
 Fast decision making, only
one person decides
SOLE
 Flexibility of operations
PROPRIETORSHIP  Suited to small businesses
 Easy to form, less
government requirement
 Suited to the practices of a
PARTNERSHIP profession
 Some are exempted from
income tax
 Flexibility of operations
CORPORATION  Capacity as a legal entity
 Practically unlimited life
 Limited liability of
stockholders for corporate
debts
DISADVANTAGES
 Limited source of capital
 Life may depend on the
life of the owner
 Management may be
dependent on the capacity
of the owner
 Personally liable for debts
and obligations of the
business
 Unlimited liability of the
partner for the debts of
the partnership
 Limited term of existence
 Limited capital
 Activities limited by the
articles of the
incorporation and
corporate by-laws
 Possibility of the abuse of
  Wider source of capital power of officers
 Subject to more
government requirements

TYPES OF BUSINESS OPERATION IN PARTNERSHIPS

A. Marketing or Trading Partnership – engaged in buying goods and selling the same
without a change in physical form.
B. Manufacturing – purchases raw materials and converts them into finished products.
C. Service Partnership – involves the rendering of professional or nonprofessional services.

 Professional services – rendered by accountants, lawyers, engineers, doctors, and

the like.
 Nonprofessional services – offered by repair shops, tailoring shops, transportation
companies and similar type of businesses.

CLASSIFICATION OF PARTNERS

 General Partner – liable for partnership debts to the extend of his personal property
after all the partnership assets have been exhausted.
 Limited Partner – one whose liability for partnership debts in limited to his capital
contribution.
 General-limited Partner – one who has all rights, powers and subject to all restrictions of
a general partner whose liability is limited to his general contribution.

GROUP OF PARTNERS

 Capitalist partner – one who contributes money or property to the capital of the
partnership.
 Industrial partner – one who contributes his work, labor or industry to the partnership.
 Capitalist-Industrial partner – one who contribute money or property as well as his work
or industry to the partnership.

CORPORATE FORMATION
  Promoter – one who undertakes to form a corporation, or causes it to be form for
specified purposes; and who further undertakes to procure for the corporation the
capital, rights, property, and organization necessary to achieve such purposes. The cost
incurred in the formation of the corporation is called ORGANIZATION COST.

SEC SUPERVISION AND CONTROL OF CORPORATION

 Securities and Exchange Commission – have absolute jurisdiction, supervision and

control over all corporation, partnership or association, who are the grantees of the
primary franchises and/or licenses or permits issued by the government to operate the
Philippines; and in the exercise of its authority, it shall have the power to enlist the aid
and support or any and all enforcement agencies of the government, civil or military.

TYPES OF BUSINESS

 Retailing – selling of goods and services directly to the final consumers or users.
 Manufacturing – process of converting raw materials into finished products. Applying
direct labor and factory overhead.
 Service business – doing work for others.

KINDS OF RETAILER
1. Department stores – carry a wide variety of product lines, like clothing, shoes, etc.
2. Supermarkets – sell variety of food and household products.
3. Specialty stores – carries a variety of models for one kind or limited product line.
4. Convenience store – carry high turnover goods, 24/7.
5. Superstore – larger than supermarkets and department stores emerged.
6. Factory outlets – different manufacturers are grouped together in one factory outlet
mall. Far from cities.
7. Direct selling – one-on-one selling.

KIND OF MANUFACTURER IN THE COUNTRY

Manufacturers of:

 Shoes or footwear in Marikina

 Cabbed goods
 Soap and toiletries
 Food products
 Garments or RTW
 School and office supplies
 Glassware, silverwares, chinaware and kitchenware

KINDS OF MAUFACTURING PROCESS

 Labor intensive – done manually by workers. Ex: handicrafts

 Capital intensive – done through the use of machinery. Ex: canned goods

MANUFACTURING OR PRODUCTION COST – the sum of the cost of direct materials labor anf
factory.

ELEMENTS OF MANUFACTURING COST

A. Direct material – all materials that form parts of the finished product. These can be
measured and charged directly, and can be identified as forming part of product such as
leather to make bags.
B. Direct labor – used in manufacturing a product which can be charged directly to the
particular product. Like the wages paid to the carpenter,
C. Factory overhead – indirect elements of cost incurred to produce a finished product.

BRANCHES OF ACCOUNTING
1. Financial accounting – concerned primarily with the preparation of general-purpose
financial statement. It is focused on recording business transactions. Its main purpose is
to calculate the profit or loss of a business during a period and provide an accurate of
the position of the business.
2. Cost accounting – focused on gathering information that is useful in determining the
product or service cost, to help in setting prices for the purpose of planning, controlling
activities, improving quality and efficiency of operation.
The systematic recording and analysis of cost of materials, labor, and overhead incident
to the production of goods or rendering services.
3. Management accounting – provides information to management for better
administration of the business. The managers are the people who develop strategies for
achieving goals of enterprise.
It involves accumulation and communication of information for use by internal users. An
offshoot of management accounting is management advisory service.
4. Auditing – process of objectively evaluating evidence and expressing an opinion
regarding the correspondence between management’s assertions and established
criteria. The certified public accountant(CPA) audits or verifies financial transactions and
accounting records. The auditor examines the financial statements and expresses an
opinion regarding the fairness and their adherence to Philippine Standard in
Auditing(PSA).
 External auditing – the examination of financial statements by an independent
party with the purpose of expressing an opinion as to fairness of presentation
and compliance.
 Internal auditing – evaluating the adequacy of a company’s internal control
structure by testing segregation of duties, policies and procedures, degree of
authorization, and other controls implemented by the management.
5. Tax accounting – preparation of tax returns and rendering tax advice. Helps clients
follow rules set by tax authorities. It includes tax planning and preparation of tax
returns. It also involves determination of income tax and other taxes, tax advisory
services such as ways to minimize taxes legally, evaluation of the consequences of tax
decisions, and other tax-related matters.
6. Fund accounting – deals with keeping records for funds of non-profit business entities.
Separate fund accounts are maintained for separate works like welfare schemes of
different nature to ensure proper utilization of funds.
7. Government accounting – done for Central Government (National Government) and
State Government budget allocations and utilization. Keeping records ensures proper
and efficient utilization of the various budget allocations and safety of public funds.
8. Forensic accounting – also known as legal accounting enables calculating damages or
settling disputes in legal matters. Investigations are done and calculations are carried
out to evaluate the damages accurately.
9. Fiduciary accounting – the accounting and evaluation of a third party’s business and
property maintained under the guardianship of another person.
10. Social accounting – the process of communicating the social and environmental effects
of organizations' economic actions to particular interest groups within society and to
society at large.