Concepts of Accounting - Report

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Added on 2020-07-22

Concepts of Accounting - Report

Added on 2020-07-22

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TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1Q1. Forming a new business and writing a brief introduction...............................................1Q2. Legal form for business...................................................................................................1Q3. Financing options............................................................................................................2Q4. Projected Balance Sheet and a Projected Income Statement...........................................3Q5. Defining the role of accounting in relation to business...................................................6Q6. Discussing whether financial statement analysis would be useful for the managers ofbusiness or not........................................................................................................................7Q7. Management should distribute profit or retain in the business:.......................................7CONCLUSION................................................................................................................................8REFERENCES................................................................................................................................9

INTRODUCTIONAccounting is the main task which is used in business in order to make them sustainableand prosperous. This is the core branch which is essentially required to consider businessoperations in the most effective manner so that the firm's long term objectives can be attained.With the help of accounting entries, company can know about each activity so that they couldframe policies accordingly (Ball, 2013). In the present report, entrepreneur is going to form aprivate limited company of which proposed name is Jackson private limited company whosemain business is in manufacturing tyres. With respect to the scenario, various concepts related toaccounting will be discussed in the report.Q1. Forming a new business and writing a brief introductionBefore going to make a plan of a business, the entrepreneur needs to opt the plan aboutkind of business entity that he needs to form. Also, he will be required to decide that whether itwould be a company or sole proprietorship or partnership firm. However, sole proprietorshipfirm is the easiest way to form and run business smoothly instead of other activities. But, thereare some drawbacks for operating a business under sole proprietorship firm. The entrepreneurplans to operate the business of manufacturing of tyres (Wengle, 2012). Proposed company nameis Jackson tyre. For that, such entrepreneur needs to opt so many formalities such asenvironmental clearance and much more. So that he could run his operations in an effectivemanner. The licensing procedures are also required so that the business could run effectively.The foremost legal requirement for forming a firm is to contact the secretary of the state which isaccountable for registering companies in entrepreneur's state. The first and foremost aim of theincorporation is to make a certificate or article of incorporation, under which the proposedcompany's terms and conditions are mentioned. Q2. Legal form for businessTo incorporate the private limited company, there are certain terms and conditions whichare required to be followed. As this is the more complex procedures than others. But there arecertain advantages which might take it worth considering as a firm form. A company is known asa distinct legal corporation; due to this, the company and its owners are the different and they arenot accountable for the losses of the firm. To run a business as a corporate entity, there is a need1

to comply with the formal requirements of state laws to frame the company. The owner of thebusiness must agree on the following to frame a corporation: The proposed name of the company.Number of shares, proposed company wish to issue. No. of shares of stock each of the owners will buy.The firm under which company will engage. Who is going to control the company? Q3. Financing optionsThere are basically so much tools which can used in order to finance the business. Whilethe major financing tool in the business is the traditional bank loan. But, there are some othertools as well which are used for funding the Jackson tyre private limited. Most of them arefavourable than others. 1.Bank loan: This is the major tool for financing the business. As, many of the firms usesthis technique in order to meet out their requirements. However, if business uses this tool,then they will have to render higher interest rates to the banks. Which will ultimatelyaffect the products price of the company. Now, this is not as practical as it was earlier.However, bank loans is provided after having extensive research about the company andthen approve it,2.Self-financing: This comes after bank loan. This is the company's own capital that areused in order to have the business operations effective and efficient. This is the mostfamous method for financing the business. By using this financing method, company canuse their assets for their financing needs so that it could gain their assets in a mosteffective manner. 3.Venture capital and or Angel investor: This is the great option to raise the funding forbusiness operations. But this is not available for the each of the business. These groupsprovides the assistance if company is having uniqueness in their operations (Cullinan andet. al., 2012). They are ready to assist the new business operations, they only work withthe businesses which could establish that they have regular revenue pouring in. 4.Raise money from relatives: In start- up business friends and family are helpful in orderto manage its financial resources. If there is a personal interaction among any financial2

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