Accounting for Business: Types of Enterprises and Long Term Finance

This report from Desklib discusses the different types of business enterprises, including sole traders, partnerships, and companies. It also provides a comparative analysis of two types of long term finance: share capital and long term debts. The report includes information on equity shares, preference shares, bonds, and debentures. The subject is accounting for business and the course code, name, and college/university are not mentioned.

Accounting for
business

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
Discuss about three types of business enterprise along with examples......................................3
Conduct a comparative analysis of two types of share capital and long term debts in relation
with sources of long term finance...............................................................................................4
CONCLUSION ...............................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Business refers to the entity that is involved in the activities of producing, buying and
selling of goods and services to public or other enterprises for sole motive of generating profits.
For some businesses, the aim can be to serve society, thus does not focus more on earning gains
from business. Finance is blood of these businesses and individuals have to put lots of efforts in
the arrangement and management of this money (Kuwabara and Hayashi, 2020). This report
discusses about various types of businesses existing in work environment along with briefing
about the types of sources of long term funds.
TASK
Discuss about three types of business enterprise along with examples.
An enterprise refers to an organisation that deals in commercial activities of
manufacturing and transferring of goods to its users. Their are various kinds of businesses that
differs from each other on the basis of legal formalities, formulation, control and capital
requirement. Selection of kind of firm depends on requirement of individual and scale of
organisation to be formed. Three variant kinds of enterprise are discussed below:
 Sole trader- In this type of business, there is only one owner. It is the most simplest form
of firm to establish as it requires minimum capital requirement and control remains in
hands of one person only. The liability of owner is unlimited in this case which simply
means that in case of any liquidity issue in future, personal assets of person can be
attached for paying off the debts of firm. Individual can hire some person for help but is
not allowed to provide it controlling rights. For instance, a single book seller, who owns
shop individually and has all decision taking rights with itself (Dey and Wang, 2021).
 Partnership- It is the type of business in which two or more persons comes together with
a common goal and form an organisation. People involved in partnership are called as
partners. It is not mandatory to get its registered, but its registration helps in many legal
formats. The share of profits and capital investment ratio is well defined in advance and
liability of partners is unlimited in it as well. For instance, partnership of GoPro and Red
Bull. They both have created a partnership deal but earlier they were working separately.
 Companies- It is a type of legal entity that is formed by a group of members. It has a
separate legal entity than its members and is treated as a different artificial human. These

are also further divided into public, private and corporations. The liability of its owners
are limited to extent of money invested by them in business. Companies which gets listed
up with stock exchange are then allowed to deal with general public by trading their
shares in market. The holders of these shares becomes owners of company and terms as
shareholders. Such as, Burberry is a company that is listed in stock exchange and its
entity is different from that of its owners (Palčič and et. al., 2020).
Conduct a comparative analysis of two types of share capital and long term debts in relation with
sources of long term finance.
Long term finance refers to those modes of arranging funds that are used by companies
for period of more than one year. It can be any kind of bank loan, borrowings or any lease. For
listed companies, it means procurement of funds from public for a long period of time so that the
project or operations of company can be carried on. Their are mainly two methods for arranging
these funds- share capital and debts. They are further divided which are discussed below:
Share capital can be defined as a money that is raised by listed company from public by
issuing shares to them. Corporations pays dividend on these shares according to nature of
holdings.
Types
 Equity shares- Persons holding these shares are the owners of that company. They are
paid dividend on earning profits according to decision taken by the directors. They are
paid at last after making payments to preference shareholders and all other payments
(Vasconcelos de Andrade and Dal Ri Murcia, 2019).
 Preference Shares- The holders of these shares are provided with a fixed percentage of
dividends on earning profits. They do not posses any voting rights in company which
helps company in retaining control in the hands of itself only. They are made payment
on prior basis.
Debts refers to the loan taken by organisation for arranging its funds by providing some
asset on security for the amount to be borrowed. These are required to be re-paid in a specific
period of time.
Kinds
 Bonds- It is a kind of loan that is launched by the company for procuring finance against
the security of some physical asset. These can be sold out any time for availing cash

which makes it most easy mode of availing funds. Owners of these bonds are the
creditors of the firm and are termed as debtholders.
 Debentures- They are the kind of loans that are sold by company to the public or other
firms with or without attaching any security with it. The holders of these receives a fixed
rate of interest and companies are obliged to clear that on regular basis even if the
business is incurring losses. It is one of the most secured format for investment for public
(Mocholi-Arce and et. al., 2021).
CONCLUSION
From the above analysis, it can be concluded that different types of businesses have their
own characteristics which differs them from each other. All the kinds have have some
advantages and disadvantages which must be recognised by an entrepreneur before making
selection of the type of business. Companies work on the basis of capital available to them, while
for expanding their business there is a need of arrangement of more funds. Their are various
sources available for the procurement of funds like loans and borrowings. Listed companies can
increase their capital by inviting public to become part of the organisation by purchasing their
shares and debentures. These modes also differs from each other and have variant features.

REFERENCES
Books and Journals
Dey, M.K. and Wang, C., 2021. Volume decomposition and volatility in dual-listing H-
shares. Journal of Asset Management, pp.1-10.
Kuwabara, T. and Hayashi, M., 2020, July. Framework and Solution for Assigning Shares to
Communication Network Domains under Secret Sharing Scheme. In 2020 35th
International Technical Conference on Circuits/Systems, Computers and
Communications (ITC-CSCC) (pp. 330-335). IEEE.
Mocholi-Arce, M. and et. al., 2021. Performance assessment of water companies: a metafrontier
approach Accounting for quality of service and group heterogeneities. Socio-Economic
Planning Sciences. 74. p.100948.
Palčič, I. and et. al., 2020, August. The Use of Organizational Innovation Concepts in
Manufacturing Companies. In IFIP International Conference on Advances in
Production Management Systems (pp. 73-81). Springer, Cham.
Vasconcelos de Andrade, G. and Dal Ri Murcia, F., 2019. A critical analysis on the additional
adjustments considered in the disclosure of the non-GAAP" adjusted EBITDA" measure
in the reports of Brazilian listed companies. Revista de Educação e Pesquisa em
Contabilidade, 13(4).