Different Types of Business Organizations and Users of Management Accounting

This report discusses different types of business organizations, including sole proprietorships, partnerships, and corporations, and their advantages and disadvantages. It also explores the main users of management accounting, such as owners, shareholders, and lenders, and how they utilize accounting information for decision-making. The report includes journal entries, ledgers, trial balance, income statement, and statement of financial position for S Keyes & Co.

PROJECT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
(A)Different type of business organizations and advantage for organizations...........................1
(b) Main users of management accounting use of accounting information................................2
PART 2............................................................................................................................................3
PART 3............................................................................................................................................4
PART 4............................................................................................................................................8
a) Income Statement of S Keyes for year ending 30th September 2019......................................8
b) Statement of Financial Position as at 30th September 2019....................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Accounting is the one of the vast field that support accounting a lot. In the current report
varied business structures are discussed in detail. Apart from this, varied users of financial
information are discussed in detail. In middle part of report journal and ledger are prepared. At
end of the report, conclusion section is prepared.
PART 1
(A)Different type of business organizations and advantage for organizations
There is different type of business organizations that are commonly known by the people.
These organizations are sole trader, partnership and company. In terms of characteristics and size
all these business organization are different from each other. All these firms have different merits
and demerits which are given below.
Sole proprietor
Sole proprietor refers to the business entities where an owner himself acts as workforce
or alone run a business. In case of some of sole trader there two or three employees that work
under the leadership of the business owner (Renz and Herman, 2016). Sole proprietor normally
operate business at small and medium scale. There are number of benefits and limitations of sole
trader and same are explained below.
Benefits
 Owner have full rights to make business decisions and he does not need to take
permission from any one to make business decisions. It is the full freedom of decision
making which in terms of advantage may sole trader business different from other.
 Sole trader businessman enjoys all gains made in the business and loss that business
faced during its tenure. For loss sole trader can not make responsible to anyone but in
case of profit there is no entity with which it need to be shared.
 Less number of rules and regulations need to be followed by the sole trader which make
it easy for it to run a business.
Partnership
Partnership refers to the business process under which multiple people join hands together
and run a business. In the partnership model ratio is determined and in that ratio all resources,
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gain and loss are shared by the partners in the business (Karadag, 2015). Advantage of
partnership are given below.
 Risk and loss in the business is shared between partners and it is the one of its major plus
point or advantage.
 Multiple people intellectual property comes at one place and in best manner and due to
this reason business is operate and managed in better way. This ultimately lead to
effective utilization of resources in the business.
Corporate
Corporate or company is the entity formed by single man but owned by number of people
because they purchase share in the company. Purchase of share means that other people buy
ownership in the company (Barr and McClellan, 2018). Advantage of the company is given
below.
In case business become insolvent then in that case business assets will be used to make payment
of debt amount. In such kind of case business owner personal asset will not be used to pay debt
amount.
Entire loss and profit is charged on company not business founders. Hence, it can be said that
liability is shares among individuals in the company.
(b) Main users of management accounting use of accounting information
Management accounting is the branch of accounting under which cost related data is saved
and analysed to compute cost of production and profitability of the business firm. By using this
tool to great extent cost factors are analysed and manager identify areas where lot of work need
to be done to control cost. Thus, it can be assumed that there is lot of significance of the
management accounting. Main users of the management accounting are explained below. Owner: It is the entity that operate and manage entire business and due to this reason, it
required business information in order to get business overview in terms of health and
profitability etc. On basis of results of financial statements manager decide that in which
area it need to work for business performance improvement. Shareholders: They are considered as real owner of the company as they hold stock in
the company or purchase a portion of the business. Due to this reason shareholders are
assumed as real owner of the company (Ogiela, 2015). One will have higher percentage
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of shareholding in the business firm it can more participate in the company decision
making process. Shareholders need company information in order to evaluate firm
current health. Accordingly, they accept and reject approval of top management of the
company through voting system. Thus, decisions are taken by the top manager but by
accepting and rejection proposal shareholders play a crucial role in the business success.
Thus, they need company information time to time so that the can make better decisions
in interest of the business firm. Lenders: These are the creditors who give loan to the business firm. They need company
business and financial information to measure the company current condition and its
capability to pay debt amount in future time period (Brusca, Gómez‐villegas and
Montesinos, 2016). If on ratio analysis it is identified that firm condition is critical and in
future time period its condition will be worse than in that case banks and other business
friends avoid to give load to the company. Hence, it can be said that lenders also need
firm financial information to make decisions and to make estimate whether cash provided
by them will be blocked in the payables or will be recovered on time.
PART 2
Journal Entries for recording the transactions in books of S. Keyes & Co.
Journal Entries
Date Particulars Debit Credit
01/06/19 Van 2696
To Pressed Garages 2696
( Being van purchased on credit
from Pressed Garages)
03/06/19 Bad Debts 50
To K. Patel 50
(Being bed debt written off for due
from K.Patel)
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08/06/19 Past Time ltd 400
To Office Fixtures 400
(Being office fixtures returned to
Past Time Ltd)
12/06/19 Bank 100
Bad Debts 60
To Q Hanson 160
(Being settlement of Q Hanson a/c)
14/06/19 Drawings 100
To Inventory 100
(Being goods drawn by owner)
28/06/19 Capital a/c 50
To Insurance 50
(Being insurance debited for
personal expense reversed)
28/06/19 Machinery 650
To Electronics R Us 650
(Being machinery purchased on
credit)
PART 3
Transaction in books of S.Keyes & Co. as on 30 June 2019
a) Journals and Ledgers
Journal Entries
Date Particulars Debit Credit
02/06/19 Van 3700
To Bank 3700
05/06/19 Office Fixtures 850
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To Office Hand ltd 850
08/06/19 Van 2 3600
To Draycarts ltd 3600
12/06/19 Cash 90
To Bank 90
15/06/19 Office Fixtures 60
To Cash 60
19/06/19 Dray Carts ltd 3600
To Bank 3600
21/06/19 Cash 2500
To Loan (Y Henry) 2500
25/06/19 Bank 200
To Cash 200
30/06/19 Office Fixtures 340
To Bank 340
Ledgers
Bank
Date Particulars amount Date Particulars amount
01/06/19 To bal b/d 7500 02/06/19 Van 3700
25/06/19 To Cash 200 12/06/19 Cash 90
19/06/19 DrayCarts ltd 3600
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30/06/19 Office Fixtures 340
30/06/19 To bal c/d 30
7730 7730
Cash
Date Particulars amount Date Particulars amount
12/06/19 To Bank 90 15/06/19 Office Fixtures 60
21/06/19
To Loan (Y
Henry) 2500 25/06/19 Bank 200
30/06/19 By bal c/d 2330
2590 2590
Van
Date Particulars amount Date Particulars amount
02/06/19 To Bank 3700
30/06/19 By bal c/d 3700
3700 3700
Van 2
Date Particulars amount Date Particulars amount
08/06/19 To Draycarts ltd 3600
30/06/19 By bal c/d 3600
3600 3600
Office Fixtures
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Date Particulars amount Date Particulars amount
05/06/19
To Office Hand
ltd 850
15/06/19 To Cash 60
30/06/19 To Bank 340
30/06/19 By bal c/d 1250
1250 1250
Dray Carts ltd
Date Particulars amount Date Particulars amount
19/06/19 To Bank 3600 08/06/19 Van 2 3600
3600 3600
Loan (Y
Henry)
Date Particulars amount Date Particulars amount
21/06/19 Cash 2500
30/06/19 To bal c/d 2500
2500 2500
Office Hand ltd
Date Particulars amount Date Particulars amount
05/06/19 Office Fixtures 850
30/06/19 By bal c/d 850
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850 850
b) Trial Balance
Trial Balance as on 30
June 19
S.No Headings Debit Credit
1 Bank o/d 30
2 Cash 2330
3 Van 3700
4 Van 2 3600
5 Office Fixtures 1250
6 Loan (Y Henry) 2500
7 Office Hand ltd 850
8 Capital 7500
Total 10880 10880
PART 4
a) Income Statement of S Keyes for year ending 30th September 2019.
Income statement as at 31 September
Revenues
Sales 400000
less returns 2000 398000
Total Revenues 398000
Expenses
Cost of goods sold 245400
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Carriage inwards 810
Motor expenses 1500
Carriage outward 2400
Rent 4000
Telephone charges 540
Wages and salaries 21000
Insurance 750
Office Expenses 400
Sundry Expenses 200
Total Expenses 277000
Net Income 121000
b) Statement of Financial Position as at 30th September 2019.
Statement of Financial Performance as at 30
September 2019
ASSETS
Non Current Assets
Van 21000
Fixtures and fittings 18000
Current Assets
Accounts receivables 52000
Inventory 40000
Cash in hand 3500
Cash at bank 9000
Total Assets 143500
LIABILITIES
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Non Current Liabilities
Current Liabilities
Creditors 12000
Shareholder's equity
Capital 25000
Less: drawings 14500 10500
Retained Earnings 121000
Total Liabilities 143500
CONCLUSION
It is concluded that there is significant importance of accounting for the firms and other
entities because it assists them to take better decisions in their business. It is also concluded that
there are different sort of business and each of them have merits and demerits. It depends on
individual that which sort of business it intends to start in terms of structure.
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REFERENCES
Books and Journals
Barr, M.J. and McClellan, G.S., 2018. Budgets and financial management in higher education.
John Wiley & Sons.
Brusca, I., Gómez‐villegas, M. and Montesinos, V., 2016. Public financial management reforms:
The role of IPSAS in Latin‐America. Public Administration and Development. 36(1).
pp.51-64.
Karadag, H., 2015. Financial management challenges in small and medium-sized enterprises: A
strategic management approach. EMAJ: Emerging Markets Journal. 5(1). pp.26-40.
Ogiela, L., 2015. Intelligent techniques for secure financial management in cloud
computing. Electronic commerce research and applications. 14(6). pp.456-464.
Renz, D.O. and Herman, R.D., 2016. The Jossey-Bass handbook of nonprofit leadership and
management. John Wiley & Sons.
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