Course: Bachelor of Science (BSc) in Management

Module: Financial and Management Accounting (ACC2002L)

Lecturer: Dr.Ming Yen Tan

Assignment title: Assignment 01 (Individual Assignment)

Submitted by: G.D.E.Imesha Jayawardhana

Student Number: 19208625

Submission Date: 23.02.2020

Word Count: 1088 (without cover page)

I declare that all materials included in this report is the end result
of my own work and that due acknowledgement have been given in the
bibliography and references to all sources be they printed ,electronic or
personal.

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Question 01

PART - A) Sole Proprietorship Business

The sole ownership or the sole proprietorship is the least difficult business structure
under which one can work a business. The sole ownership is certifiably not a legitimate
substance. It just alludes to an individual who possesses the business and is by and by liable for
its obligations. A sole ownership can work under the name of its proprietor or it can work
together under an imaginary name. The invented name is essentially an exchange name. It
doesn't make a lawful element separate from the sole owner proprietor.

The sole ownership is a well-known business structure because of its effortlessness, simplicity of
arrangement, and ostensible expense. A sole owner need just register their name and secure
nearby licenses, and the sole owner is prepared for business. A particular burden, be that as it
may, is that the proprietor of a sole ownership remains by and by at risk for all the business'
obligations. In this way, if a sole owner business runs into monetary difficulty, leasers can bring
claims against the entrepreneur. In the event that such suits are effective, the proprietor should
pay the business obligations with their own cash.

The proprietor of a sole ownership ordinarily signs contracts in their own name, in light of the
fact that the sole ownership has no different personality under the law. The sole owner proprietor
will ordinarily have clients compose checks in the proprietor's name, regardless of whether the
business utilizes an invented name.

Let’s take a look Strength and weaknesses of Sole Proprietorship Business.

Strength Weaknesses

 Owner receives all profits  Owners are subject to unlimited

 Low organizational cost
 Can establish easily and inexpensively
 Independence
 Secrecy
 A sole proprietor need not pay
unemployment tax on himself or herself
personal liability for the debts, losses
and liabilities of the business.
 Owners cannot raise capital by selling
an interest in the business.
 Sole proprietorships rarely survive the
death or incapacity of their owners and
so do not retain value
 Limited fund raising power tends to
inhibit growth.

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Limited Liability Company

Numerous states permit a business structure called the limited liability company (LLC). The LLC
emerged from entrepreneurs' longing to receive a business structure allowing them to work like a
conventional organization. Their objective was to convey pay to the accomplices (who detailed it on their
individual annual assessment forms) yet in addition to shield themselves from individual risk for the
business' obligations, likewise with the corporate business structure. By and large, except if the
entrepreneur sets up a different company, the proprietor and accomplices (assuming any) accept total
obligation for all obligations of the business. Under the LLC rules, be that as it may, an individual isn't
answerable for the association's obligation, gave the person didn't make sure about them by and by,
likewise with a subsequent home loan, an individual charge card or by risking individual resources.

Since the LLC is a moderately new authoritative document for organizations, bureaucratic and state
governments are as yet seeing approaches to fix guidelines concerning them. Shockingly, some venture
advertisers use LLCs to dodge protections laws. That is the reason it's basic to counsel with your lawyer
and CPA before choosing which corporate structure bodes well for your business

Strength Weaknesses
 Limited liability  No stock
 Choice of taxation  Limited life span
 Avoid double taxation  Fewer incentives
 Flexible ownership rules  Taxes
 More paper works
 Operating flexibility
 The management structure of an LLC may
 Flexible profit or loss distribution be unfamiliar to external parties.

PART-B)

Mr. Fernando would expect to open up a Chinese restaurant in Colombo, Sri Lanka. So he will
establish his restaurant under sole proprietorship business; because Sole proprietorship is one of
the most popular business types in the foodservice industry, and it's when a business is owned by
a single individual. Sole proprietorship has a simple structure, and it's common among small
restaurants and family-owned businesses.

 There is no legal separation between the owner and their business, so they can be held
personally liable for all debts and obligations incurred by the business. This means that debt
collectors can repossess the owner's house and belongings if they were to default on their
debt.
 It's harder to get funding from investors for a sole proprietorship.
 While sole proprietorship means one person has complete control over the business, they also
have the most responsibility, which is stressful.

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Question 02
Difference between financial accounting and management accounting

Accounting refers to the process of recording, classifying and summarizing in monetary terms,
the business transactions and events and interpreting the results. It is used by entities to keep a
track of their financial transactions. Financial Accounting and Management accounting are the
two branches of accounting. Financial accounting stresses on giving true and a fair view of the
financial position of the company to various parties.

On the contrary, management accounting aims at providing both qualitative and quantitative
information to the managers, so as to assist them in decision making and thus maximizing the
profit. This article excerpt is created to help you learn the significant differences between
financial accounting and management accounting.

Financial Accounting Management Accounting

Financial accounting reports are predictively
valuable and historically factual to help those
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wishing to invest or get involved with the
organization to make better financial decision
Financial statements are prepared at the end of
the accounting period which is usually one
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fiscal year.
Managerial accounting specifically deals
with confidential material and exclusively
for a company’s top management to make
critical decision.
The reports are prepared as per the need and
requirement of the organization. it can be
specific period such as a day, moth or week.

Financial accounting is encompassing, Management accounting is specific offering

focusing on the entire organization.
03
Financial accounting mostly ends with
financial statement preparation and distributed itself with creating operational based reports
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externally and internally.
Information in financial accounting
computation follows the general accepted
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financial accounting norms and standards.
detailed and divided information on diver’s
things such as task, department, operations,
specific activities, sales, and product.
Managerial accounting usually concerns
and distributed to the management inside the
organization.
Information for managerial accounting
computation is guided by the managerial
needs identified within a specific
organization.

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Reference

Colin Drury (2007), "Differences between management accounting and financial

accounting", Management and Cost Accounting, p. 7,

”LLC Filing as a Corporation or Partnership" IRS. Internal Revenue Service. Retrieved 9

October 2019.

Larson, Aaron (7 July 2016). "The Sole Proprietorship" Expert Law.Retrieved 26 January 2018.

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