Answered: There are three popular forms of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

“There are three popular forms of business organisation that run in order to make profits; 1) Sole traders, 2) Partnerships, and 3) Limited companies.

Discuss the characteristics of each of these organisations including their advantages and drawbacks.”

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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Accounting is primarily concerned with identifying, recording, measuring, summarizing transactions that can be measured in monetary terms and interpreting and communicating the results with interested users.

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