Accounting for Business Decisions

Running head: ACCOUNTING FOR BUSINESS DECISIONS
Accounting for Business Decisions
Name of the Student
Name of the University
Author’s Note

ACCOUNTING FOR BUSINESS DECISIONS1
Table of Contents
Introduction...................................................................................................................2
Issues (a)......................................................................................................................2
Issues (b)......................................................................................................................2
Issues (c)......................................................................................................................3
Issues (d)......................................................................................................................3
Issues (e)......................................................................................................................3
Conclusion and Recommendation...............................................................................4
References...................................................................................................................5

ACCOUNTING FOR BUSINESS DECISIONS2
Introduction
The main aim of this report is to analyse as well as evaluate different issues
that Tim is facing for starting a business. The first part discusses about the forms of
organization. The next parts discusses about the choice of sources of finance and
the impact of form of business on it. After that, this report discusses about the need
and importance of accounting information and knowledge to start a business.
Issues (a)
There are two options of the forms of organization that Tim can adopt; they
are Sole Proprietorship and Partnerships. These are discussed below with
advantages and disadvantages.
Sole Proprietorship – This is the simplest form of business that is owned by one
individual who is responsible for making all the business decisions.
Advantages
 It is easiest as well as less expensive form of ownership.
 Decision-making is clear cut.
 Earnings are subject to taxation only once as personal income
(Permwanichagun et al. 2014).
Disadvantages
 The proprietor has to bear unlimited liabilities and is legally responsible for all
the debts of the business.
 It faces disadvantages to raise required finds.
 The business dies with the owner (Anastasia 2015).
Partnerships – This is the form of business that is owned by two or more people
who are responsible for making the business decisions.
Advantages
 This form of business is easy to establish.
 The ability to raise funds increases because of the presence of more than one
partners.
 There is availability of more management skills (Burns 2016).
Disadvantages
 The partners have to bear unlimited liabilities; and one partner is liable for the
actions of other partners.
 Profit needs to be shared among all partners.
 High chances of occurring disagreement since decisions are shares (Zaridis
and Mousiolis 2014).
Issues (b)
It is crucial to mention the fact that the choice of firm will by Tim will have an
impact on the availability of finance for his business. For a sole proprietary business,
there is less sources of finance available which puts a restriction on the owner to
raise the required fund. On the other hand, when there is two or more people form a
partnership business, the sources of finance increase since every member can
arrange funds from their own sources. A corporation has the most number of