Practical Business Accounting: Sources of Funds and Importance of Financing

PRACTICAL BUSINESS ACCOUNTING

TABLE OF CONTENT
MAIN BODY..................................................................................................................................2
Suitable sources of funds for various business organisation......................................................2
Importance of financing in operating a business firm................................................................3
CONCLUSION...............................................................................................................................4
REFERENCES................................................................................................................................5
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INTRODUCTION
There are two types of activities but this study will show about the economic activity that is
business. Business is an economic activity which is being carried out by individual or group of
individual to earn livelihood, this study report in regard with practical business accounting will
discuss about the source of funding for various business form like sole trader, partnership,
limited company and public limited company and at last this study report will show the
importance of the finance in operating a business organisation (Serninger, Haji Warfaa Younes,
2019).
MAIN BODY
Suitable sources of funds for various business organisation
Sole Trader :- the sole trader is the one who solely runs the business and is responsible for the
loss and profit of the business, the main sources of funds of sole trader are as follow:-
 Personal capital : a sole trader can invest its own personal saving in the business.
 Retained profit : every time a profitable firm gives a positive net income, this is known
as retained income with (García-Vaquero Álvaro,Roibás Millán 2018).
 Sale of the asset : whenever a sole trader doesn't get finance from other source and have
left no finance then what the sole trader with can do is to sale the asset or property
registered on the name of the firm
 Loans from bank : the sole trader can go to bank or financial institution for the loan on
the business.
Partnership :- When two or more than two groups of individual come together for sale or
purchase of goods and services within one firm as an owner then it said to be as partnership, the
main source of funds of partnership are as follows:-
 Self funding or bootstrapping : finance through own saving in the business.
 Venture capital funding : visiting to the venture capital investor and asking them to
finance or invest in the company partnership
 Business loan : taking loan from angels or lending partners or government loan are said
as the best source of finance as they can get it at lower rate of interest (Sharma, 2021).
 Crowd funding : availing the funding through crowdfunding campaign
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