Accounting for Business: Enterprise Types and Long Term Finance

This report explores the crucial role of accounting in strategic decision-making, highlighting the different types of business enterprises—sole proprietorship, partnership, and company—and their respective advantages. It evaluates the distinctions between share capital (equity and preference shares) and debt (bonds and bank loans) as long-term financing sources for listed companies, considering factors like voting rights, dividend obligations, tax benefits, and risk mitigation. The report concludes that a combination of debt and equity, or diversification, can optimize benefits and reduce risks for listed companies seeking long-term funding. Desklib offers a wealth of resources including similar reports and past papers for students.

ACCOUNTING FOR
BUSINESS

TABLE OF CONTENTS
INTRODUCTION.....................................................................................................................................3
MAIN BODY.............................................................................................................................................3
Explaining reason for three different types of business enterprise along with example...........................3
Evaluating difference between two form share capital and debt for long term source of finance for
listed companies......................................................................................................................................4
CONCLUSION..........................................................................................................................................5
REFERENCES..........................................................................................................................................6

INTRODUCTION
Accounting is measurement, processing and communication of financial & non-monetary
information which leads to take strategic decision. In the current era, there is higher competition
which require firm to pay attention on developing effective accounting system in business so that
effectiveness can be derived. Current report will highlight tree different types of business along
with example. Recent study will include difference between two forms share capital and debt in
long term sources of finance of listed public companies.
MAIN BODY
Explaining reason for three different types of business enterprise along with example
There ae different types of business which operates on distinct scale for the purpose of
gaining various benefits (Cohen, 2017). The different types of business involve solve
proprietor, partnership and companies.
Sole proprietor is one of the business form which is concerned with managing and controlling
operational practices individually (Akan and Tevfik, 2020). It is one of the simplest form of
business type in accounting in which sole proprietor owns and manages business by himself.
There is no interference of third party in respect to managing, controlling, organizing, etc.
business practices. The main reason behind its existence involves distinct benefits that can be
achieved by applying this form of business. It includes easy establishment, no assets bifurcation,
full control & ownership stake, higher confidentiality, minimal reporting requirements, tax
advantages, etc. from the evaluation it can be articulated that for obtaining this kinds of benefits
entrepreneur choose sole proprietorship in turn higher profitability can be derived (Akhmetshin
and et.al., 2018). It can lead businessman to take independent decisions for overcoming
prevailing challenges.
Partnership refers to forming business by involving two or more partners who indulge into
agreements for clarifying sharing of profits and losses (Murthy, Roll and Colin-Jones, 2021). The
agreement in which partners enters are called as partnership deep that helps in making clarity
among partners regarding roles, responsibilities, etc. it helps in overcoming conflict, disputes,
etc. that aids in gaining distinct skills, abilities and experience for accomplishing business
objectives (McCartney, 2021). The reason underlying the fact behind selection of this particular

form of business includes combined capital, availability of expertise & knowledge, cost saving,
more business opportunities, better collaboration, moral supports, new perspectives, potential tax
benefits, etc. For instance- partnership business can get higher capital as compare to sole
ownership business which as well allow it to sue expertise knowledge, diverse skill helps in
gaining specialization in work. There are number of benefits which can be derived by partners
through involving into partnership business (What Is a Business Partnership? 2021). For
achieving such benefits organization largely concentrate on using such form of enterprise so that
higher profitability & sustainability can be attained.
Company is voluntary association of people that contribute fund for common purpose. It
is widely utilized type of business as allows to have different kinds of benefits in turn all
predetermined objectives can be accomplished (Saputra and et.al., 2021). It is considered as
separate legal person distinct from its owners which allows stakeholders to get obtain different
kinds of merits. The crucial reason behind existing of such form of enterprise is to enable
stakeholders to derive ability to achieve several different pros (Wu, Jiang and Liu, 2021). It
comprises easy to transfer ownership, limited liability of shareholders, perpetual existence,
expansion potential, diffusion of risk, professional management, etc. On the basis of this, it can
be specified that for attaining such benefits business are operated as company.
Evaluating difference between two form share capital and debt for long term source of finance
for listed companies
There are various options available for firm for raising funds in order to accomplish the
objectives of business (Types of Share Capital, 2021). Capital structured can be formulated by
using equity and debt in suitable proportion. For obtaining funds in longer duration business can
use two forms of capital & debt as source of finance by taking strategic decision as each differs
from other.
The two forms of share capital are such as equity and preference share. These both differs from
each other can be taken into consideration by business for longer duration so that meeting
overall requirements of business can become possible. Equity share capital allows the
stakeholder to the voting rights (Schaltegger, 2018). Paying dividend to equity shareholders is
not necessary as paid after overcoming obligation related to preference shareholders. It declines
the burden of paying dividend which helps in effectively using funds. For the purpose of having

fund for longer duration the listed company can use equity shares as in preference shares there is
need to pay dividend which results in continuous declining of cash flow.
On the other side, there are two forms of debts available for the company that can be
taken into practice as source of finance. It involves installing and resolving type of debts that
both are available for larger span of time such as bank loan, mortgage, bonds, etc. these both has
distinct interest, payment structure, amount, options, etc. it can be selected by looking into these
aspects (Vallet, Locatelli and Pramova, 2020). Bonds is one of significant method of debt
financing that helps company to resolves its obligation after specified period. For the longer
duration using debt sources is widely taken into process as it helps in gaining tax benefits. Bank
loan is as well crucial strategy of debt financing for listed company as can easily meet eligibility
criteria and provides assistance in overcoming obligation by paying installments.
By comparing both it can be specified that both these forms of equity and debt differs
from each other as provides distinct level of competitive advantages (Hilorme and et.al., 2019).
In respect to listed companies raising fund for longer duration may use combination of both
mentioned forms of debt & equity or having diversification. It helps in mitigating risk and
inclines benefits.
CONCLUSION
From the above report it can be concluded that accounting play crucial role in gaining
reliable and accurate monetary and non-financial for taking decision. The current report has
involved reasons for existence of different business types such as sole proprietorship, partnership
and company as each provides distinct level of competitive advantages. Difference between two
form share capital and debt for long term source of finance for listed companies has been
involved in current study.

REFERENCES
Books and journals
Akan, M. and Tevfik, A. T., 2020. 8 Basics of Corporate Finance. In Fundamentals of
Finance (pp. 157-164). De Gruyter.
Akhmetshin, E.M. and et.al., 2018. Freelancing as a type of entrepreneurship: Advantages,
disadvantages and development prospects. Journal of Entrepreneurship Education.
21(2). pp.1528-2651.
Cohen, J., 2017. State of the Union: NGO–business partnership stakeholders. In Unfolding
Stakeholder Thinking 2 (pp. 106-127). Routledge.
Hilorme, T. and et.al., 2019. Human capital cost accounting in the company management
system. Academy of Accounting and Financial Studies Journal. 23. pp.1-6.
McCartney, C., 2021. Business Education as a Partnership for Sustainable
Development. Partnerships for the Goals. pp.101-110.
Murthy, S.R., Roll, K. and Colin-Jones, A., 2021. Ending business-non-profit partnerships: The
spinout of social enterprises. Scandinavian Journal of Management. 37(1). p.101136
Saputra, A and et.al., 2021. Risk Management Application for Business Startups" Jamu
Partnership" in Indonesia. International Journal of Research and Review. 8(8).
pp.148-155.
Schaltegger, S., 2018. Accounting for eco-efficiency. In Green Accounting (pp. 287-302).
Routledge..
Vallet, A., Locatelli, B. and Pramova, E., 2020. Ecosystem services and social equity: Who
controls, who benefits and who loses? (Vol. 307). CIFOR.
Wu, J., Jiang, H. and Liu, T., 2021, January. Research on the Entry Mode of Chinese
Multinational Enterprises into American Market. In International Conference on
Decision Science & Management (pp. 401-410). Springer, Singapore.
Online
Types of Share Capital. 2021. [Online]. Available through:< https://groww.in/p/types-of-share-
capital/>
What Is a Business Partnership?. 2021. [Online]. Available through:<
https://www.thebalancesmb.com/what-is-a-business-partnership-398402>