Accounting for Business

This article discusses the reasons for existence of Sole Trader, Partnership and Companies with examples. It also critically distinguishes between Long Term Debt and Share Capital in the context of Unilever, HSBC, Sainsbury and Morrisons.

Accounting for business

Table of Contents
1. Why do you think that three different types of business enterprise(sole trader, partnership and
companies ) exist? Use example to illustrate your answer..............................................................3
2. Critically distinguish between two forms share capital and two forms of long term debt in the
context of long term source of finance of listed public limited companies.....................................4
References........................................................................................................................................7

1. Why do you think that three different types of business enterprise(sole
trader, partnership and companies ) exist? Use example to illustrate your
answer.
Sole trader- This type of business which is also known as sole proprietorship(Ainsworth and
Deines, 2019). It is a kind of business which is managed one single person and that person is
know as sole proprietor.
Reason for existence- There are variou8s reason for existence for sole trader business are.
 Control- In this kind of business, businessman has a proper control on business
operations(San-Jose, Mendizabal and Retolaza, 2020). In this a proprietor does not
need to ask anyone regarding changes they wants to make in their business.
 Operational flexibility- By this term it can be said that there is no strict rule to do
operational functionality of business under such type of business enterprise. A
businessman has full right to make changes in business as per their need and want.
 Low starting cost- This type of business enterprise can star with low capital and
minimum resources. A businessman does not need to spend so much capital on
formation of such kind of business(Smith and et.al 2019).
Companies- It an artificial person which has a separate legal entity, a common seal and
perceptual entity, which is formed under companies act 2006.
Reason for existence- Following are the reasons for existence for of companies are.
 To provide employment those who are in need- Establishment of companies provide
employment to different skilled people in the country where it is establish. By providing
jobs to candidate as per their skills and education it remove unemployment form that
country. Hence this is considered as foremost reason behind establishment of country.
 Drive innovation- Companies provide innovation in technologies for the people which
helps to make people work easier. Providing innovation for the people of society is the
main reason behind existence of companies.
 Contribute to infrastructure growth of country- Incorporation of companies helps in the
providing employment to people of country, which rise in living of standard of people of

society as a result GDP of country also rise. Which eventually develop the infrastructure
level of country.
Partnership- It is form of business entity in which two or more than two people come together
to establish a business with a common view to earn profit. Partnership is formed under
partnership act 1980(Zeff and Dyckman, 2020).
Reasons for existence- Below are the reasons for existence of partnership are.
 Existence of contract- In partnership there must lies a contract between persons who
come together for doing a business. Presence of contract make legal relationship among
partners which helps in carrying out business together.
 Sharing of profits- In this form if business entity there is a sharing of profits among
partners at a agreed ratio which they discussed in partnership deed. Sharing of profits
diving profits among partners. Hence this is another reason for establishment of
partnership firm because profit does not go with only one single person(Beams, 2018).
 Reduce business load- Partnership is formed by two or more than two person through
which business load does not pass to only one person, every partner is responsible
equally for handling business operations. Therefore, it reduces business load among each
partner.
2. Critically distinguish between two forms share capital and two forms of
long term debt in the context of long term source of finance of listed public
limited companies.
Public companies which are taking for critically distinguish between share capital and long term
debt are Unilever and HSBC.
a. Share capital.
Resources Unilever HSBC
Share capital Authorised share capital Authorised share capital

Explanation The current authorised share
capital of Unilever is 285
million pound. Which has
increased by 60% as
comparison to last year
The current authorised share
capital of HSDC is 20184
million pound which has
reduced by 22% as comparison
to last year.
Reason The main reason behind
increasing in authorised share
capital of mentioned company
is that recently company has
issued new share in the market
for some of its operational
requirement which as
increased its authorised
capital.
The main reason behind
downfall of companies
authorised capital is that in last
year due to covid 19 many
people have lost their jobs in
every sector. Therefore people
have withdrawn their funds
from their saving account
which has reduced the
profitability of mentioned
bank.
Share capital Issued share capital Issued share capital
Explanation Current issued share capital of
mentioned company is 236.96
million pound which has
increased by 20.48% as
comparison to last year.
Current issued share capital of
mentioned company is 20,272
million pound which has
increased by 66% as
comparison to last year.
Reason Main reason behind increasing
in issued share capital of
mentioned company is that it
has issued several share of it to
public for its future growth
plan and so many people have
subscribed for that company
share. hence this has increases
Main reason behind increasing
in issued share capital of firm
by 66% is that because by
concerning about people it has
issued several mobile banking
apps for taking banking
facilities in the form of loan
sanction, opening of saving

the issued share capital of
firm.
account and many more.
People have used such
facilities which has increased
the issued share capital of
firm.
b. Long term debt
Resources Sainsbury Morrisons
Long term debt Bank loan Bank loan
Explanation In current year, mentioned
company has raised a loan of
10,935 million pound which
has decreased by 48.2 %
percentage as comparison to
last year.
In the current year,mentioned
company has raise a loan of
1986 million pound which has
increased by 79.24% as
comparison to last year.
Reason Main reason behind
declination of bank loan is that
during current year mentioned
company has achieved huge
profitability by rising in sales
which made company enough
capable to pay its long term
debt like bank loan.
Main reason behind increase in
bank loan by mentioned
company is that during current
year lot of amount of bank has
been raised by Morrisons for
its operational functionality
which has increased bank loan
in current year.

References
Books and Journals
Ainsworth, P. and Deines, D., 2019. Introduction to accounting: An integrated approach. John
Wiley & Sons.
San-Jose, L., Mendizabal, X. and Retolaza, J.L., 2020. Social Accounting and Business
Legitimacy. Handbook of Business Legitimacy: Responsibility, Ethics and Society,
pp.967-981.
Smith, K.J., Emerson, D.J., Haight, T.D., Mauldin, S. and Wood, B.G., 2019. An examination of
the psychometric properties of the Connor-Davidson Resilience Scale-10 (CD-RISC10)
among accounting and business students. Journal of Accounting Education, 47, pp.48-
62.
Zeff, S.A. and Dyckman, T.R., 2020. Accounting and Business Research: the first 50 years,
1970–2019. Accounting and Business Research, 50(4), pp.360-395.
Beams, F.A., 2018. Advanced accounting. Pearson.
Online
Unilever, 2021. Available through: <https://www.unilever.com/investor-relations/annual-report-
and-accounts/>
HSBC, 2021. Available through:
<https://www.hsbc.com/investors/results-and-announcements/annual-report>
Sainsbury, 2021. Available through:
<https://www.hl.co.uk/shares/shares-search-results/s/sainsbury-j-plc-ordinary-28,47p/
financial-statements-and-reports>
Morrisons, 2021. Available through:
<https://www.morrisons-corporate.com/investor-centre/annual-report/>