ACCOUNTING FOR BUSINESS.

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

1ACCOUNTING FOR BUSINESS
Table of Contents
Introduction........................................................................................................................2
Forms of Organization for Tim.......................................................................................2
Availability of Finance....................................................................................................3
Raising Required Finance..............................................................................................4
Accounting and Non-Financial Information’s.................................................................4
Skills and Accounting Knowledge..................................................................................5
Conclusion.........................................................................................................................5
References.........................................................................................................................6
Appendix............................................................................................................................7

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Introduction
Financing the business operations of the company can be well done by an
individual or a corporation with the help of the costs and benefits that are directly
attributable or flowing to the entity in the stated period of time. The different forms of
organization that can be considered by Tim for business purchase and the pros and
cons associated with the same has been well highlighted in the given report.
Forms of Organization for Tim
In order to startup with a new business organization Tim can particularly consider
three main forms of business organizations and the same can be particularly in the field
of Sole Proprietorship, Partnership and Corporation.
Sole Proprietorship: A proprietor is a common type of business organization that is
easy in formation and at the same time offers a complete managerial control over the
owner. The owner or the proprietor of the business undertakes various business
decisions and is solely responsible for the undertaken business activities. The key
advantage of Sole Proprietorship business is in the form of quick and independent
decision that a proprietor can take for the business (Schölin, Ohlsson and Broomé
2017). On the other hand, the key disadvantage of the sole proprietorship business will
be in the form of limited availability of capital and management support that the
proprietor could have received if it would have been in other forms of organizations.
Partnership: A partnership business can also be considered by Tim that would be
acting as a mutual agreement between two or more partners for the purpose of sharing

3ACCOUNTING FOR BUSINESS
profit and loss associated with a business (Wakefield 2017). The primary advantage of
a partnership business is in the form of removal of tax burden that Tim could get or the
benefit of reported losses-profits or losses are directly "passed through" to partners for
reporting in their individual income tax returns.
Corporation: A corporation is a legal entity that is created for the purpose of conducting
business. The corporation acts as an separate entity which handles and controls the
various responsibilities that are associated with an organization. As persons are taxed
on an individual basis and at the same time can be held legally viable/responsible for
the various courses of actions that are undertaken by the company (Drucker 2017). The
key benefit that Tim could receive when selecting a Corporation form is that he can
avoid the personal liability factor. On the other hand, the key disadvantage that Time
could be running in the forming up an Corporation would be primarily in the field of costs
involved and extensive record keeping data that needs to be maintained in the business
level.
Availability of Finance
The availability of finance for an organization is indeed affected by the form of
organization that is done or formed by Tim. The finance evaluation is definitely done by
the banks and lenders with the help of background of organization or corporation
formed up. Sole Proprietorship like can easily raise money for a shorter period of time
and can easily get in the form of short loans. On the other hand, if Tim goes ahead with
the Partnership business than he cannot simply raise fund or finance by issuance of
equity shares unlike a corporation (Ferrando, Ganoulis and Preuss 2019). If the finance
requirement as stated by Tim is considerably more higher than the Tim should go ahead

4ACCOUNTING FOR BUSINESS
with the Corporation form of business organization where he can easily raise short term
as well as long term finance for the financing capital requirement that is demanded
(Lee, Sameen and Cowling 2015). The cost of finance is also a key factor that is
affected by the financing source that is selected by the company. So it is important for
Tim to consider various possible factors and scenarios for the purpose of selecting the
form of business organization.
Raising Required Finance
The finance support that is required by Tim can be raised in the form of Equity
Shares Issuance or Equity Capital if it considers the Corporation form of business. If a
Partnership business is selected than the finance can be easily raised by Tim with the
help of Short-Term Borrowings and Personal Capital investment, but the same is
currently not possible with Tim as he would not be able to bring in a sufficient amount of
capital for the purpose of investment. In the case of sole proprietorship business Tim
can only get the same if he deposits a certain set of securities as a mortgage. It is
advised that the required finance should be well raised by the Tim the form of Equity
Share Issuance, Debt Funds that may be easily available from a Corporation
perspective.
Accounting and Non-Financial Information’s
There are various accounting information that Tome could consider for the
purpose of purchasing the business and the same can be in the form of requirement of
the finance amount for the purpose of funding the operations, associated cost of
finance. The accounting information would be helping the company in allocating the
scare capital that is available with a firm (Theriou 2015). A key sample of the budgeted

5ACCOUNTING FOR BUSINESS
financials is attached outlining the various business operations that would be carried on
by the business in a three year time frame and the associated profitability that the
company will be generating from the same (Appendix 1).
On the other hand, non-financial information for a company can be primarily in
the form of important business factors, market penetration (growth of the products
offered) and various other economic factors that could potentially affect the business
operations of a company. These are the key non-financial information that are required
for managing the business (Haller, Link and Groß 2017).
Skills and Accounting Knowledge
The key skills and accounting knowledge that would be required by Tim in the
due course of business will be in the form of General Business Knowledge, Roles
played by accounting in financial application in the management of the business activity,
technological updates and skills, communication skills, leadership abilities, better
customer service orientation and specialized experience (Banerjee 2015).
Conclusion
Every form of business organisation has its own set of pros and cons and the
same has been highlighted for Tim’s new business consideration that he would be
making for the purpose of starting a new business purchase where corporation form has
been recommended.

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References
Banerjee, B., 2015. Fundamentals of financial management. PHI Learning Pvt. Ltd..
Drucker, P., 2017. Concept of the Corporation. Routledge.
Ferrando, A., Ganoulis, I. and Preuss, C., 2019. What were they thinking? Firms’
expectations on the availability of external finance.
Haller, A., Link, M. and Groß, T., 2017. The term ‘non-financial information’–a semantic
analysis of a key feature of current and future corporate reporting. Accounting in
Europe, 14(3), pp.407-429.
Lee, N., Sameen, H. and Cowling, M., 2015. Access to finance for innovative SMEs
since the financial crisis. Research policy, 44(2), pp.370-380.
Schölin, T., Ohlsson, H. and Broomé, P., 2017. The role of regions for different forms of
business organizations. Entrepreneurship & Regional Development, 29(3-4), pp.197-
214.
Theriou, N.G., 2015. Strategic Management Process and the Importance of Structured
Formality, Financial and Non-Financial Information. European Research Studies, 18(2),
p.3.
Wakefield, K.L., 2017. Stakeholder engagement: A case study of a long-term
partnership between a university and a non-profit organization (Doctoral dissertation,
Northeastern University).

7ACCOUNTING FOR BUSINESS
Appendix
1) Profit and Loss Statement
Preop
Year 0 1 2 3
Revenue 0 300,000 360,000 432,000
Cost of sales 0 165,000 198,000 237,600
Gross profit 0 135,000 162,000 194,400
Gross Margin 273,918 314,510 364,553
Expenses/overheads
Premises (rent, rates) 20,000 21,000 22,050
Wages and salaries 22,000 23,100 24,255
General expenses 1,400 1,470 1,544
Accountant Fees 1,500 1,575 1,654
Payroll Tax 2,200 2,310 2,426
Utilities 1,200 1,260 1,323
Sales and Marketing 50,000 52,500 55,125
Postage & Telephone [phone]
Repairs and Maintainance 1,500 1,575 1,654
Preliminary expenses 750 788 827
Lease Payments 2,000 2,100 2,205
Total expenses/overheads 102,800 105,840 111,132
Profit before tax 32,200 56,160 83,268
Tax @ 19% 6,118 10,670 15,821
Before tax net margin 11% 16% 19%
Profit after tax 26,082 45,490 67,447
Transfer to reserves 26,082 45,490 67,447
Particulars Year 1 Year 2 Year 3
Return on Investment 7% 13% 18%
Payback Period Year 0 Year 1 Year 2 Year 3
Amount Invested (Equity Investment) -500000
Final cash Flows Received 26,082 45,490 67,447
Total Cash Inflows 139,019
Payback/Amount Recovered -500000 -473,918 -428,428 -360,981
Payback Period 0 1 2 6.35
Total Payback Period (In Years) 2.98
(4) PROFIT AND LOSS FORECAST & ROI