Business the capital used to the business

Business
is a place where making, buying and selling goods and providing services in
exchange of money. These businesses have types of ownerships and they are sole
proprietorship, partnership and limited company.

Sole
proprietorship means only a one person owns the whole business. There are
strengths and weaknesses in this type of ownership. The strengths of a sole
proprietorship business are, the owner is possessed all the authority to make
decisions, so the owner no need to talk to anyone, he or she can make any
decision whenever wanted. Another strength is it is easy to start and end a
sole proprietorship business. With the right amount of capital a person can
easily start a business and in any situation the person can stop the business.
Another strength is the owner can get the whole profit by him or herself gained
by the business.

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Some
weaknesses of sole proprietorship business are, the capital used to the
business is a less amount comparatively to the partnership business. Another
weakness is not having good decisions, because the owner has the ability to
make quick decisions and no one to discuss if the idea is good or bad a wrong
decision can be made. Another weakness is if the business faces any losses the
owner has to bare the loss alone.

Partnership
business means two or more persons own a business and the maximum limit of
partners for a partnership business is twenty persons. Strengths of a
partnership business are, the capital used to the business if high
comparatively to a sole proprietorship business because more partners means
more capital. Another strength is very successful decisions can be made because
by discussing with partners a very good decision can be made. Another strength
is if the business gets any losses the loss is divided among the partners so a
person no need to bare a huge loss.

Weaknesses
of a partnership business are, when making decisions fight may arose among
partners because some partners may not like the decisions of others decisions.
Another weakness is the profits are divided among the partners because more the
partners less the amount of profit get by one partner. And another weakness is
if a partner did something wrong every partner becomes responsible for the act
of that partner.

A
limited company is a business which held on its own rights, meaning the finance
of the business is separate from the finance of the owners.  A strength of limited company is a large
amount of capital is been invested. Another strength is the liabilities are
limited and the limited liabilities divide among the shareholders.

Weaknesses
of a limited company are a limited company is not easy to star because it is
not easy to enter the field with competitive companies. Another weakness is
fights arose among the director board when making decisions.

 

Question 2

Discuss
4 main distinctions/ differences between Financial Accounting and Management
Accounting.

Accounting
is a process of identifying, measuring and communicating financial information
for the purpose of decision making. There many types of accounting and main are
financial accounting and management accounting.

Financial
accounting is concerned on providing information to the external users of
accounting information to discharge stewardship.

Management
accounting is concerned on providing information to internal users of
accounting information for planning, controlling and decision making process.

There
are differences between financial and management accounting and they are,

Financial Accounting

Management accounting

·        
Deals with reporting to parties
outside the organization. This means presenting the financial data to the
public in simple to understand the financial status of the organization.
 
·        
Details are highly regulated. In
financial accounting data are presented through income statement, balance
sheet and the cash flow statement, and because the information is released to
the public consumption the companies must be very careful in how the data are
presented; the calculations, graphs and figures and the order of the report.
 
 
·        
Details presented are simple. As
financial accounting data are used by the people outside the organization the
data should be understandable to those people so the data are very clear and
less revealing.
 
 
·        
Use historical data. The
financial accounting data are presented on a quarterly or annual basis so it
contains data for a defined period of time.

·        
Deals with the parties inside the
organization. This means the data are presented to relevant parties who makes
decisions of the organization.
 
 
·        
Details are unregulated.
Management accounting reports are been used internally and so  each company has their own system and rules
on creating management accounting reports to decision making purpose.
 
 
 
 
 
·        
Data presented are highly detailed.
An organization always looks forward to be competitive, so the organization
has to take successful decisions. And so the data should be presented clearly
with a lot of details.
 
·        
May use projections about the
future. Management accounting looks at the past performance of the
organization and creates a forecast of the business because to make decisions
the data should be informed by this type of accounting data.