...Comprehensive Statement Analysis Business organizations come in different forms, and although they all have financial gains and losses, not all have the same rules and regulations that need to be complied with when preparing financial statements. The Advantages and Disadvantages of the Different Forms of Business Organization Sole proprietorship is a business organization that is owned by one individual. The advantages to a sole proprietorship is that all profits go to the business-owner and that the owner has full control of the business (Kimmel, Weygandt, & Kieso, 2011). There are also some disadvantages in a sole proprietorship-such as the owner is personally liable for all debts and obligations of the business. Another disadvantage is that the business and the owner are not separate beings (Cheeseman, 2013). A business organization that is owned by two or more individuals is a partnership. The advantages to a having a business partnership are that there is more capital put into the business and that the obligations and debts are shared among each partner. Individuals who are part of a partnership can also deduct their losses through their personal income tax. There are a few disadvantages to being part of a partnership are that all profits are shared and that all decisions need to be made by each partner (Cheeseman, 2013). A C Corporation is any corporation that is taxed separately from its owners. Corporations are a “separate legal entity (or legal person) for most...
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...Financial Management for a Small Business Participant Guide Table of Contents Welcome ................................................................................................................................................................................. 3 What Do You Know? Financial Management for a Small Business ................................................................................ 4 Pre-Test .................................................................................................................................................................................. 5 Benefits of Financial Management ...................................................................................................................................... 7 Budgeting ............................................................................................................................................................................... 7 Discussion Point #1: Budgeting............................................................................................................................................ 7 Bookkeeping .......................................................................................................................................................................... 8 Cash Flow ................................................................................................................................................................................
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...sources available to a business P1.1 Identify the sources of finance available to the new business you have chosen. P1.2 Asses the implications of the different sources of finance to your chosen business P1.3 Evaluate appropriate sources of finance for your chosen business project. LO2 Understand the implications of finance as a resource within a business P2.1 Analyse the costs of different sources of finance for your chosen business. P2.2 Explain the importance of financial planning to the business organisation you have chosen. P2.3 Asses the information needs of different decision makers in your chosen business P2.4 Explain the impact of finance on the financial statements of your chosen business LO3 Be able to make financial decisions based on financial information P3.1 Analyse budgets and make appropriate decisions from the case study P3.2 Explain the calculation of unit costs and make pricing decisions using relevant information P3.3 Asses the viability of a project using at least two investment appraisal techniques LO4 Be able to evaluate the financial performance of a business P4.1 Discuss the main financial statements P4.2 Compare appropriate formats of financial statements for different types of business P4.3 Interpret financial statement using appropriate ratios and comparisons, both internal and external P 1.1 To start a new business you need money, to invest...
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...ACC 561 Jared Jones Forms of Business Organization Introduction There are four ways that a business can organize itself. The owners and partners in this newly formed business may share in a variety of responsibilities and must decide which form their business should take on. The four basic ways a business can be organized is a sole proprietorship, partnership, C corporation and S corporation. There are a variety of advantages and disadvantages to each. When it comes to Tax implications, Legal implications and Accounting implications this is especially true. Below is an analysis of the various forms of business and the advantages and disadvantages to each, along with various implications associated with taxes, legality, and accounting. Sole Proprietorship Sole Proprietorship is a type of business run by a lone individual. This individual owns the business, and deals solely with all of the losses and all of the profits. The owner also is responsible for all of the liability and has complete control of business operations (Carr, 2011). Typically the business will have an income statement and a balance sheet. The owner through personal income tax return pays all taxes for the business. There are several advantages to this form of business: It is generally not difficult to organize due the requirements of registration not being as harsh to abide to and the financial capital is relatively small. Also, the sole owner has the ability to make all decision for the company...
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...sheet or income statement and explain how the use of it may be applied to your everyday life. One of the major financial statements used in accounting is the income statement. The income statement is beneficial to accountants and business owners. Many will also refer to this statement as the “profit and loss statement,” “statement of operations,” or “statement of income.” Regardless of its name, it serves the same purpose and that is to show profitability of a company during a specific period of time. The period of time covered is usually chosen by the business or organization and can vary. Within the statement, revenues, expenses, gains and losses are distinctively displayed. Income statements are imperative to everyday life whether it applies to personal activities or business transactions. The income statement can be applied to my everyday life in many ways. It allows me to see the revenue stream coming in and allows me to budget more affectively. Understanding my personal income statement also builds a safety net of security or savings. Expenses involved in daily activities allow me to analyze whether money is being saved or lost. #2. Using the same concept selected above, discuss how a business manager may benefit from an understanding of this statement. Businesses use standard formats or financial statements to record their performance. The income statement communicates the inflow of revenue and the outflow of expenses for a business over a given...
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...Small Business Idea Tina Sergio ACC/561 Week 1 February 5, 2013 Bobby Bates Small businesses and entrepreneurs form the backbone of the U.S. economy. Since early America, entrepreneurs have generated ideas that create opportunities so other people were able to begin their own company, and, it is likely that new entrepreneurs will continue to do so for the foreseeable future. The government is aware of this and periodically releases funds in order to encourage new business ventures with the intention these businesses create opportunity for new development and employment in our economy. With such a task to live up to, business founders and owners must understand the practices associated with forming a business, and what is most effective for making a business successful. Image Solutions is a consulting business that is dedicated to this task. By working with organizations, Image Solutions helps in the design and implementation of programs that support the business mission and empower human behavior that will contribute to the success of the entire business. Image Solutions clients include individuals as well as businesses, public and private, for profit and not for profit, and early stage ventures and already established companies. In order to fully commit to this mission, Image Solutions must provide a foundation toward...
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...the lifeblood of business or it can be said as the most important part of all the business enterprises. To understand finance, you need to know the entire business indeed. Finance can be used for various reasons like expanding the business, investing and purchasing fixed assets like land and building, machinery so on. In order to survive in this competitive world every organisation need to have a good strength of finance available to their business or else they won't be able to survive in this world. Hence, it is very important to select the correct sources of finance available to the company. Finance can be in two types' external sources or internal sources. TASK ONE 1. SOURCES OF FINANCE AVAILABLE TO A BUSINESS Finance can be arranged from internal sources or external sources. External sources of finance are funds that come from outside the business. Here the business are getting loans from individuals or institutions that do have business relations directly e.g. banks. 1.1 Internal sources The main internal sources of finance for a start-up are as follows: Personal sources These are the most important sources of finance for a start-up, and we deal with them in more detail in a later section. As mentioned earlier, most start-ups make use of the personal financial arrangements of the founder. This can be personal savings or other cash balances that have been accumulated. It can be personal debt facilities which are made available to the business. It can also...
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...account and a business' bank account is called a financial statement. The financial statement lets the person and business know what debits have been taken place in a monthly and yearly time and also credits that have been done in a monthly ans yearly time. There are four types of a financial statement and that is a balance sheet, a profit and loss statement, a statement of a change in equity, and a statement of cash flow. These four types of a financial statement have their own purpose in the accounting field and they are all very important to the businesses and individual people that use each of them. The balance sheet lets the businesses and people that use this sheet know what assets, liabilities, and ownership equity at anytime they need it, monthly, quarterly, or yearly. The balance sheet is also a summary of a sole proprietorship, business partnership, and other business organizations, if companies and businesses need them depending on if there is an audit of the company or needing them for month end or yearly end purposes. A balance sheet usually has assets in one section of the statement and liabilities and net worth in the other section. There are two types of a balance sheet and that is an account form and a report form. The balance sheet for personal use has current assets such as cash flow whether is would be in the checking account and or in a savings account or liabilities such as mortgages, and other debits that go through the account. The profit and loss...
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...Small Business Idea Melissa Baird Accounting ACC/561 June 4, 2012 Michael Gaspar The receipt of the small business funds would provide an opportunity to open a soup kitchen to feed homeless and low income individuals. The business would be a sole proprietorship because of the simplicity, and because the success or failure of the business is solely contingent on the owner’s actions not those of partner’s or shareholders. In addition, a sole proprietorship is not taxed at the corporate rate instead profits and losses are reported on schedule C of the owner’s personal tax return. Completing a schedule C, income statement, and balance sheet for a sole proprietorship is less complicated than completing partnership or corporate tax returns. Sole Proprietorships Sole proprietorships are the easiest form of business to set up and operate and are not subject to state or federal government approval, however, some local governments require business’s to obtain a license to operate. Advantages of sole proprietorships include ease and low cost, the owner makes management decisions, has exclusive use of all profits, and the business can be liquidated without approval from a partner or shareholders. Disadvantages include limited capital, sole liability for all business contracts and possible torts that may be incurred as a result of negligence by employees. Also as a sole proprietor all capital used to start the business will...
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...| | | | Small Business Idea Paper Nakisha Burton ACC/561 Accounting June 9, 2013 | | One of the most important business choices one can make is the decision to become an entrepreneur and invest the necessary time, money, and energy into starting a business. I always dream of owning and running my very own childcare center. The childcare business offers entrepreneurs the opportunity to pursue a passion for child care and child development while enjoying the independence and responsibility of being his or hers own boss. However, starting a childcare business is not as easy as one may think. There is a great deal of information one must be fully aware of. The decision of which type of forms, such as Sole Proprietorship, Partnership, C Corporation, S Corporation, and Limited Liability Company (LLC), can challenging. The legal, tax, accounting implications, the advantages, and disadvantages, the financial statements associated with a childcare center, and plan to present to market, are the reasons to consider for a well designed center that can be develop into a successful plan. Sole proprietorship advantages and disadvantages Unless I choose a specific form of business, my new business will become by default a sole proprietorship or partnership (Daily, 2011). The advantage of a sole proprietorship is ease in establishment and ongoing maintenance as the owner manages operations without the need to consult others. In addition, the solitary owner...
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...Small Business Idea Paper The government recently released funds to individuals who want to create a small business. This concept of releasing funds to individuals will create more jobs and stimulate the economy. The first step for a small business owner is to determine which of the four forms of business the organization will best fit with the new owner’s ideas. In addition, the business owner will need to review all tax legalities and implications associated with the different forms of business for her organization. This paper will discuss the four forms of business and the different types of financial statements associated with the forms of business in relation to consequences of taxes, liabilities, and accounting implications. Sole Proprietorship Sole proprietorship is the most common and easiest form of business to create. Some of the benefits of a sole proprietorship are that the owner can make decisions of hiring and firing employees, decisions of which vendors to use, what materials and equipment to purchase and what direction they want the business to take. A disadvantage is that the owner is limited to funds as a sole proprietor can only access the funds that are available. In addition, the sole proprietor is responsible for all liabilities associated with the business. The financial statement associated with at sole proprietorship is the statement of cash flow. The statements of cash flows provide financial information regarding cash receipts and payments...
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...[Type the company name] 24/6/2012 Business Administration Managing financial resources and decision: assignment not be spoken Introduction: If you can read a nutrition label box or a football score, you can learn to read basic financial statements in order to make the right investments. If you can follow a recipe or apply for a loan, you can learn basic accounting. Financial statements aren’t difficult and they aren’t rocket science. Before understanding the four types of financial statements, you must first understand the three types of business entities, there are three forms of business entities, and they are: sole trader, partnership, and corporation. Each form has its pros and cons in complexity, and how its taxed, also, some business forms have subclasses, like the s corporation, c corporation, and professional corporation, so all that means choosing the right business form is no easy task, considerations must be taken, you must learn how to select, plan, and organize your chosen business form so that its perfect for you. The sole trader: This is the simplest business form you can operate at; the sole proprietorship is not a legal entity. It basically refers to an average person who owns the whole business and is personally responsible for all its debts and receives all the profit. A sole trader can handle business under the name of the owner or it can operate under...
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...Small Business Idea Paula Boyce University of Phoenix Accounting ACC - 561 Professor Trenda Hackett December 07, 2011 Small Business Idea The government has released fund for creating small businesses. One’s interest is to establish a small business and must determine which of the four forms of business organization will best suit the business chosen. Legal, tax, accounting, and other implications when selecting from the four business types are matters of considerations (University, 2008 - 2011). The four forms of business include Sole proprietorship, Partnership, C Corporation, and S Corporation. Discussion will explain advantages and disadvantages of the four forms of business, financial statement associated with each form of business organization, and the consequences of tax implications, legal implications, and accounting implications such as SOX and FASB. An explanation what one’s business provides, the choice of one’s business organization form, and one’s rationale for choosing the form of business organization chosen (University, 2002). Sole proprietorship advantages and disadvantages Sole proprietorship is the most common and simplest form of business. An individual owns and manages the business and is responsible for business transactions and responsible for debts and liabilities incurred (AllBusiness.com, 2007, p. 1). Advantages of sole proprietorship is the proprietor is in full control of the business, no corporate taxes, legal cost is...
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...The four main forms of business organizations namely sole proprietorship, partnership, C corporation, and S corporation have various advantages and disadvantages in terms of tax implications, legal status, financial obligations, and even set up time and compliance issues. A sole proprietorship is an individual based business. The advantages of sole proprietorship are various including the easiness to start and dissolve the company, the ability to have personal and complete control over the company, and the ability to retain all profits and include them in personal tax returns. Sole proprietorship has some disadvantages that include the owner’s unlimited liability over the company. The owner is legally responsible for all the debts of the company. Another disadvantage is that it is hard to raise funds because it depends on one person who might not have sufficient funds. It may also be difficult to attract high skills and professional employees because some would want to either have a high ranking position in the company or the chance to buy stock. Sole proprietors are also taxed more than corporation for example corporations pay 15% tax for income up to $ 50,000 while sole proprietors pay 15% (if filing married filing jointly) for income up to 35, 800 only. Financial statements for sole proprietorship are the income statement, the balance sheet, the statement of cash flows, and the statement of owner’s equity. In a partnership there are two or more owners. Partnership is also...
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...Small Business Plan September 20, 2011 Accounting 561 Being able to have a small business that is important to the community is the ultimate goal for my company. Providing lost cost party and wedding planning is goal of Sia’s Supreme Planning. Deciding on the best business form out of sole proprietorship, partnership, “C” corporation, and “S” corporation are the first step in building a lucrative company. Once the business organization has been decided, we have to decide on the best financial statement associated with the business. Understanding the business forms such as tax implications, legal implications and accounting implications will provide clarity during the filing for taxes. There are several advantages and disadvantages to sole proprietorship, partnership, “C” corporation and “S” corporation. A sole proprietorship is one person alone. He or she will have unlimited liability for all debts of the business, and the income or loss from the business will be reported on his or her personal income tax return along with all other income and expense he or she normally reports (although it will be on a separate schedule). Although proprietorship avoids the expense of forming a partnership or corporation, many start businesses this way because they are unfamiliar with the other forms of organizations (Business Organization, 2011). All profits and can be re-invested in the business or it can be used by the owner and negative aspect is Owner has full liability for entire...
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