Holmes Institute HC1010 Accounting for Business Decisions

This assignment solution addresses a scenario where Tim is considering opening a new business, focusing on the accounting aspects of the decision. The paper begins by exploring different business structures, including sole proprietorship and partnership, outlining their advantages and disadvantages. It then delves into financing options, considering the capital requirements for a small-scale business like Tim's shop. The assignment highlights the importance of accounting information, such as trend analysis and budgetary control, in making informed business decisions. Furthermore, it emphasizes the necessary accounting skills and knowledge required for managing the business effectively, including communication, financial management and complex accounting treatments. The paper concludes by underscoring the significance of selecting the appropriate business form and securing adequate financing, along with the importance of possessing essential accounting skills for the success of the business.

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

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ACCOUNTING FOR BUSINESS
Table of Contents
Introduction........................................................................................................................2
Discussion..........................................................................................................................2
Different Form of Business............................................................................................2
Options of Financing......................................................................................................3
Raising of Finances........................................................................................................3
Accounting Information..................................................................................................3
Accounting Skills and Knowledge..................................................................................3
Conclusion.........................................................................................................................4
Reference..........................................................................................................................5

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ACCOUNTING FOR BUSINESS
Introduction
The process of accounting is considered to be important for preparing the
financial statements and depicting the financial performance of the business during a
particular period. The assessment revolves around the decision of Tim to purchase a
new shop for the purpose of starting off his new business (Rothaermel 2013). The
decision to open a new business would require appropriate source of financing and the
same would also be discussed in the assignment. Furthermore, advantages and
disadvantages of different form of business would be shown in the discussion as well.
Discussion
Different Form of Business
There are variety of options available to Tim for opening a new business but the
same needs to be taken considering the size of operations and future goals and
objectives of the business. The options which are available to Tim for opening a new
business considering the different business structures are:
Sole Proprietorship
The sole proprietorship is a form of business which is managed by single person
and all the major decisions are taken by the owner of the business (Jeston 2014). This
form of business does not have a separate legal existence in the eyes of law and the
associated liabilities for such a business is unlimited for the owner of the business.
Advantages
 This form of business is easier to control and manage considering the small
scale of operations of the business.
 There are no legal obligations required for establishing such a business and also
for winding up the business (Coleman, Cotei and Farhat 2016). Therefore, it is an
appropriate choice for retail sector businesses.
Disadvantages
 The liability of the owner or the sole proprietor is unlimited and would be
personally liable for all losses of the business.
 The main difficulty which arises in this form of business is in relation to raising of
appropriate loans for financing the activities of the business.
Partnership
In a partnership form of business, the operations of the business are managed by
two or more persons making them joint owners of the business and the profits and
losses of the business are shared in profit sharing ratio as determined by the partners in
their partnership agreement. In a partnership form of business, registration is optional
for the management of the company.
Advantages
 The ownership of the business is jointly managed by the partners and therefore
expertise can be maintained in managing the operations of the business as
duties and responsibilities of the business is appropriately segregated.
 The partners are able to raise capital easily from the market due to its nature of
the business.
Disadvantages

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ACCOUNTING FOR BUSINESS
 The partners are required to act as an agent of the partnership and therefore any
action of any partner would be binding on the entire firm due to the principle of
agency which is followed in a partnership form of business.
 The liabilities of the partners are considered to be unlimited considering the
nature of the partnership and also the partnership deed. The partners would be
held liable for all debts and losses which is incurred by a business.
Options of Financing
The financing decisions relating to a business is always taken considering the
financial requirements of the business and also the goals and objectives which the
business intends to follow. In sole proprietorship form of business, the requirement of
capital is not that high and therefore are generally small scale in operations. In a
partnership form of business, the requirement of capital is moderately higher than a sole
proprietorship business and thereby requires each partner to contribute some capital
towards the capita fund of the business and in addition to this, they also take loans or
supporting the operations of the business (Schwienbacher, Baker and Welter 2015).
The case of Tim reveals that he wants to open a shop which will be a small-scale
business and therefore the amount of capital which would be required would be lower
and the business would also be a sole proprietorship business.
Raising of Finances
The business which Tim intends to initiate is a shop and as Tim is the only
owner, it would be a sole proprietorship business. The capital which is require for
starting up the business would be mostly contributed by Tim and a part of the same
would be accumulated through debt financing sources. In order to acquire the loan, Tim
needs to show financial viability of the project and also show forecasted revenue from
the same. In addition to this, Tim also would be required to consider some collateral
securities which needs to be provided for the purpose of acquiring the loan.
Accounting Information
In order to take major decisions relating to a business, accounting information is
a major source of ensuring that the business has appropriate information available. The
tools which are mostly used for the purpose of forecasting financial information are
trend analysis and also budgetary control practices (Mikic, Novoselec and Primorac
2014). In the case of Tim, budgetary control and trend analysis would be utilized for
collecting information on the basis of which decision are to be taken regarding the
viability of the project. The non-financial information which are considered by a business
are related to market trends and competition level in the market.
Accounting Skills and Knowledge
The skills and accounting knowledge which is required are listed below in details:
 Accounting Skills: Tim is required to possess some accounting knowledge
regarding complex treatments and disclosures which would help him to formulate
accounting records of the business.’
 Communication skills: In order to operate effectively in the market, Tim needs
to engage in communication and build relationship with the customers so that
they can be retained (Demski 2013).
 Financial Management: The financial management practices of a business is
important in order to keep a track of the finances of the business and ensure that
the same are being used in a productive manner.

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Conclusion
The discussion which is shown above demonstrates the importance of form of
business and also considering the advantages and disadvantages of the same. The
decision regarding the sources of finance is also taken on the basis of the form of
business which is established. Further, it is a requirement that appropriate skills needs
to be possessed by Tim for ensuring that the activities of the business are successfully
carried out.
Reference

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Coleman, S., Cotei, C. and Farhat, J., 2016. The debt-equity financing decisions of US
startup firms. Journal of Economics and Finance, 40(1), pp.105-126.
Demski, J., 2013. Managerial uses of accounting information. Springer Science &
Business Media.
Jeston, J., 2014. Business process management: practical guidelines to successful
implementations. Routledge.
Mikic, M., Novoselec, T. and Primorac, D., 2014. Influence of financing source on the
small business performance. Economic and Social Development: Book of Proceedings,
p.283.
Rothaermel, F.T., 2013. Strategic management: concepts. New York, NY: McGraw-Hill
Irwin.
Schwienbacher, A., Baker, T. and Welter, F., 2015. Financing the business. The
Routledge companion to entrepreneurship, pp.193-206.