Accounting for Business

This paper discusses the different forms of organization and their impact on finance in the context of starting a business in Sydney, Australia. It also explores the sources of raising funds and the required accounting and non-financial information for operating the business.

Running head: ACCOUNTING FOR BUSINESS
Accounting for Business
9/11/2019

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Table of Contents
Introduction................................................................................................................................2
Forms of Organization...........................................................................................................2
Sole Proprietorship.............................................................................................................2
Partnership..........................................................................................................................2
Impact of choice of organization on Finance.........................................................................3
Sources of raising funds.........................................................................................................3
Security for arranging finance................................................................................................3
Required Accounting Information.........................................................................................4
Required Non-financial Information......................................................................................4
Accounting Skills needed to operate the business.................................................................4
Conclusion..................................................................................................................................5
References..................................................................................................................................6

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Introduction
The intent of this paper is to support Tim is selecting the form of organization that he can
adopt to operate the business in the Sydney, Australia. Tim is from Darwin and wants to start
a business of his own. He is thinking to purchase a delicatessen in Sydney. The shop has been
in the market for many years but has not attained any success. Tim does not have enough
savings and has to borrow high amount of fund for purchasing the shop. This paper is
supporting Tim to identify the best form of organization that can be established within limited
budget.
Forms of Organization
Sole Proprietorship
A sole proprietorship is also called as the sole trader, proprietorship or individual
entrepreneurship is a kind of enterprise that is operated by single person and under which
there is no legal division between the business entity and the owner. The advantages that can
be gained by Tim by adopting sole proprietorship are to start a business with low budget. In
comparison to sole proprietorship, other forms of businesses are costly. Sole proprietorship is
inclined to be reasonable models to start as well as to maintain. On the other side, this model
is comprised of some of the disadvantages that are it increases the liability of the owner
(Permwanichagun, Kaenmanee, Naipinit and Sakolnakorn, 2014). If the debt of the business
that Tim is planning to establish becomes overwhelming the finance of the owner will be
impacted.
Partnership
A partnership is said to be a form of arrangement between two or more parties for managing
and operating the business and sharing the profits and losses. Tim can adopt this form of

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business too but this also has advantages as well as disadvantages. The main advantages that
can be gained by Tim are it is very easy to form. There is no requirement to meet the legal
formalities. But, the disadvantage of this form of organization is unlimited liability. Under
this, the Tim and his partner will be personally and jointly accountable for all the business
Debts (McQuaid, 2010).
Impact of choice of organization on Finance
Finances are considered to be the fuel of every business, whether it is at downturn or
upswing. Similarly, the selection of type of organization has major impact on the finance
available to the owner. In the case of Tim, he already has limited budget to start the business
therefore, he decides to start Corporation there will be definitely limited liability but, he has
to invest high amount. This is because; it is comprised of paying high and different taxes and
gaining different rights and licenses (Cortenraad, 2012). On the other hand, opting sole
proprietorship and partnership is considered to be easy to establish and require low funds
because there is no need to meet legal requirements of licenses.
Sources of raising funds
Sole Proprietorship – The sources that are available for Tim for establish sole proprietorship
business are approaching to friends and families for investing in the business, seeking out for
the angel investor, and applying for the small business administration loan.
Partnership – The sources that can be used by Tim for raising the fund for this type of
business is crowd funding, bank loan, and searching venture capital investors (Hendricks,
2019).
Security for arranging finance
For arranging the funds for the sole proprietorship as well as partnership business, Tim can
use its Collateral assets that will be owned by him (Markowitz, 2019). Besides this, the owner

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can provide the main details of the asset that he owns while arranging the funds for the
business.
Required Accounting Information
If Tim desires to purchase the delicatessen store in the Sydney market, it has to get the
detailed knowledge of analysing the financial statements of this business. This is because it is
very important to know whether or not the purchased business will provide any type of return
to the owner. The financial statements that must be reviewed by Tim are profit and loss
account, balance sheet, and cash flow statement. In addition to this, to purchase the business
Tim will also be requiring the basic knowledge of ratio analysis, under which it can at least
calculate the profitability, growth, and liquidity position of the business (Commonwealth
Bank of Australia, 2018).
Required Non-financial Information
The non-financial information that is needed to establish and purchase a business is
environmental, human rights, and social information. It is also called as the Environmental,
Social, and Governance information or ESG (Theriou, 2015). If there will be lack of this
specified information then the business will unable to behave in a responsible manner.
Besides this, these types of information help business in enhancing the risk management
strategies and long-term financial and social competitiveness.
Accounting Skills needed to operate the business
Some of the typical accounting skills and duties that Tim has to maintain in order to operate
smooth business is filling the tax returns and preparing the accounts. Besides this, in the
today’s digital world, there is need of basic knowledge of different software that is being used
in the business. In consideration to the knowledge of accounting, Tim will need the
knowledge related to accounting software which is concentrated towards data mining,

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interpretation of the complex models, computations, and development of models, etc.
(Nwaigburu and Eneogwe, 2013). In addition to this, in order smoothly operate the finance
department of the business Tim will be needing the knowledge of financial statement’s
analysis. Under this, he has to learn to analyse the financial statement of the business to
recognize the growth, profitability or loss.
Conclusion
The above paper has been prepared to solve the case of Tim, who is planning to start a
business in Sydney with limited budget. He is confused regarding what form of organization
and additional steps need to be taken to succeed. The above report has analysed the different
forms of organization and the financial and non-financial requirement that must be met by
Tim. From the analysis, it has been identified that opting for Sole Proprietorship structure for
the business will be beneficial as it is easy to start and require limited budget.

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References
Commonwealth Bank of Australia (2018) Buying A Business? See This Essential Checklist
First [Online]. Available from https://www.commbank.com.au/guidance/business/buying-a-
business--see-this-essential-checklist-first-201611.html [Accessed 11 September 2019]
Cortenraad, W.H. (2012) The corporate paradox: economic realities of the corporate form of
organization 2nd ed. Germany: Springer Science & Business Media.
Hendricks, D. (2019) 5 Clever Ideas to Raise Funds [Online]. Available from
https://www.inc.com/drew-hendricks/5-clever-ideas-to-raise-funds.html [Accessed 11
September 2019]
Markowitz, E. (2019) 5 Tips for Using Collateral to Secure a Small-Business Loan [Online].
Available from https://www.inc.com/guides/201101/5-tips-using-collateral-to-secure-a-small-
business-loan.html [Accessed 11 September 2019]
McQuaid, R.W. (2010) Theory of organizational partnerships: partnership advantages,
disadvantages and success factors. In The New Public Governance? 1st ed. U.S: Routledge.
Nwaigburu, K.O. and Eneogwe, V.N. (2013) Impact of Accounting Skills on
Entrepreneurship Education for Self-Reliance and Sustainable Development: A Study of
Selected Small Scale Business in Owerri Municipal Imo State. Mediterranean Journal of
Social Sciences, 4(16), p.81.
Permwanichagun, P., Kaenmanee, S., Naipinit, A. and Sakolnakorn, T.P.N. (2014) The
situations of sole proprietorship, E-commerce entrepreneurs and trends in their E-commerce:
A case study in Thailand. Asian Social Science, 10(21), p.80.

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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.