STRAND 3 FINANCIAL ACCOUNTING AND THE ACCOUNTING PROCESS

Business Ownership and Types of Businesses

Sole Trader Partnership Private Public Company Public Co- Clubs

Company Enterprise Operatives
Definition Business Business Business is Business is managed by Organisation Organisation Association
managed by one managed by at managed by two minimum of seven established by formed formed by
person least two to to unlimited shareholders government to By a group of group of people
Only twenty five shareholders (unlimited) produce and people with with same
partners (Family distribute specific interest
members only) certain goods purpose
Number of Only 1 2 to 25 2 to 25 2 to Unlimited Government Minimum of Any Number
People shareholders Only 10
Narayan’s Shoe William and Tappoo Fiji Ltd RB Patel, Fiji TV Airport Fiji Ltd, Vunavutu Co- Red Cross
Example Shop Goslings ATS Op
Aim/ Motive Make Profit Make Profit Make Profit Make Profit Provide goods Make profit Provide service
and service that and provide to members
private sector service to
cannot produce members
Legal Business Licenses Partnership Act Memorandum Memorandum NA NA Constitution
Document Partnership Or Article Or Article Association
Agreement Association Certificate of
Certificate of Incorporation
Incorporation
Advantages Easy to form, no Profit is shared Limited liability, Shareholders are Ensure Members Provide goods
conflict of among partners, greater potential responsible for the debts continuity learn more and services to
interest, owner more capital, to raise more of the company only up supply & low skills, community
takes all profit workload capital, not the value of their shares, cost of goods Members without
shared, losses required to can raise more capital, and services, Share Profit motive
are shared publish audited companies have government profits
financial reports continuous life despite operated so not
the death of the conflict of
shareholder interest
Unlimited Unlimited Shares are only Expensive, difficult to Lead to Raising Raising capital
Disadvantages liability, owner liability, conflict for family manage, loss of control inefficiencies capital Problem,
has to bear loss, of interest, low members, less for shareholders, profits due to rising Problem, conflict
limited life, not capital capital are taxable, annual cost,lack of conflict between
legal entity compared to compared to reports needs to be competition & between executive
company public audited and examined by Unqualified members members
companies general public officers working
Accounting Equation

Transactions:

Any financial event or activity taken place in the business.

There are 4 types of transactions

Transaction

Cash Transactions

Credit Transaction Transactions that are settled immediately by cash

Transaction where there is no immediate transfer of cash

Revenue Transaction Capital Transaction

Revenue Transaction Capital Transaction

Those that are involved Capital expenditure is buying and selling of fixed assets

With profit making activity

Accounting Equation It represents the equality of assets on one side and with claims of creditors and the owners on the other side. Based on double entry system. It also
facilitates the preparation of financial statements.

Assets= Liabilities + Proprietorship

Assets + Expenses= Liabilities+ Proprietorship+ Revenue