Types of Business Organisation and Main Users of Accounting Information

This report discusses the different types of business organisations and their advantages, as well as the main users of accounting information and how they use it. It also includes journal entries and ledgers for recording transactions, and an income statement and statement of financial position for S Keyes.

REPORT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
a. Types of business organisation and advantages of using profit business structures................1
b. Main users of accounting informations and use of information by the users..........................2
PART 2............................................................................................................................................3
PART 3............................................................................................................................................4
PART 4............................................................................................................................................7
a) Income Statement of S Keyes for year ending 30th September 2019.....................................7
b) Statement of Financial Position as at 30th September 2019. .................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
In present times there are different organisations existing that are using profit based
business structures. Report will reveal bout different types of organisation with their advantages.
It will provide who are the main users of accounting information and and the use of accounting
information by these users. It will give an understanding about recording of transactions in books
from journals to ledgers and preparation of trial balance by numeric solution of the questions.
PART 1
a. Types of business organisation and advantages of using profit business structures.
Types of business organisations
Sole Proprietorship
Business is owned by single individual and is most common and simple form in
businesses. This business is run for making benefit to the self. Existence of business is
completely dependent on decision of the owner. Business comes to end when there are no
nominees to continue the business. In Sole proprietorship owner have the unlimited liabilities
and is personally responsible for all liabilities.
Advantages
 Owner is not under obligation to decide for place and here activities related to business.
 Proprietor is sole person who receives all profits that are generated in the business and
does not have share to with others as there is no legal obligation (Petty and Mandel,
2015).
 Business do not have to follow various regulatory requirements and there are not much
requirements for establishing business.
Partnership
In this type of business ownership is shared by two or more partners who make
contribution of resources in enterprise. Partnership is divided into 2 parts i.e. limited and general.
In general ones owners collectively invest their funds in business. All partners investing their
funds are having unlimited liabilities for debts of business. Even a small contribution will make
the partner liable to all the debts of business. Formal agreements are not required in general
partnership and could be implied between business owners. Where in limited liability formal
agreements are must between partners. Certificate of partnership is required to be filed with
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respective states. This partnership allows partners for limiting own liability for debts of business
on basis of their investment and ownership (Spence and Hyams-Ssekasi, 2015).
Advantages
 Business gets more capital as resources are shared by partners. Resource availability is
increased due to partnership.
 Profits are shared by all the partners of enterprise and also the liability is shared between
partners of the enterprise. Liability can be limited up to the amount of their contributions
in business.
 Partnership is easy to establish and is flexible form of business.
Corporation
Corporation refers to business organisation that is having distinct legal personality from
its owners. Corporation is having a separate standing from its owners and held personally liable
for all its owners. All the transactions are incurred in the name of company and not in name of
owners. It can open bank account, receive loans and can sue or be sued in its own name separate
from its owners. Profits which are generated by corporations are assessed and taxed under
personal income of company (Steingard and Gilbert, 2016). But establishing a corporation is
costly and complex process with many legal requirements.
Advantages
 Owners of the company limit their liability is limited to debts and losses. Personal assets
of owners are not seized for business debts.
 All the profits & losses incurred belong to corporation only.
 Ownership can be transferred from one person to another easily.
b. Main users of accounting informations and use of information by the users.
Objective behind accounting information are correlated to requirements of decision-
making by the users of financial informations. Needs of users define the factors that are to be
taken into considerations while designing accounting information system. Users require
accounting information for facilitating process of decision-making, this is serving as platform for
framing guidelines for ensuring uniformity, accuracy and relevance of accounting informations
& procedures over different organisations (Schroeder, Clark and Cathey, 2019).
Owners
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They are investors in business and are titleholders to organisations. Owners include sole
proprietor, partners and shareholders of companies. Accounting information provides all the
essential information to its owners related to business. Main requirement of having accounting
information of organisation is of keeping track over the financial performance of businesses,
changes in financial position and economic conditions of organisation. These information
facilitates assessment of manager's performance of organisation for evaluating their effectiveness
and efficiency. Information helps owners in determining the performance whether business are
growing and maximising profits.
Customers
They are the people who purchase goods and services of businesses and also known as
economic drivers of organisations. Customers rely on organisation for their products and services
for resale or for their self consumption, they use accounting information for evaluating the
capability of organisations that they will continue their supplies and meet their future needs.
Information is derived from financial statements of company that indicates profit or loss and
financial position of organisations
Suppliers
These parties provide organisations with products and services that are essential for
sustenance and business of organisations. Supplies range over raw materials used in
manufacturing, outsourced services & transportation services (Schroeder, Clark and Cathey,
2019). Suppliers of businesses are compensated in cash or credit basis. Their need is of
determining the capability of firm to meet the obligations related to payment of supplies.
Lenders
Providers of alternate sources of capital to organisation. Lenders provide business with
debts and receive interest in return. Lenders include banks, financial institutions and debenture
holders. They require this information for knowing the economic performance & financial
standing of organisations for assessing the profitability of entities and their capacity of paying
interest on the borrowed amounts. They should have enough resources for paying principal as
well interest on loan.
PART 2
Journal Entries for recording the transactions in books of S. Keyes & Co.
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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)
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
To Office Hand ltd 850
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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
a) Ledgers
LEDGER OF S. KEYES
CASH A/C
Date Particulars DR. £ Date Particulars CR. £
01/06/19 To capital 7500 15/06/19 By fixtures 60
25/06/19 By bank 200
30/06/19 By bal b/f 7240
7500 7500
CAPITAL A/C
Date Particulars DR. £ Date Particulars CR. £
30/06/19 To bal b/f 7500 01/06/19 By cash 7500
7500 7500
VAN A/C
Date Particulars DR. £ Date Particulars CR. £
5

02/06/19 To bank 3700
08/06/19
To
Draycarts 3600 30/06/19 By bal b/f 7300
7300 7300
BANK A/C
Date Particulars DR. £ Date Particulars CR. £
25/06/19 To cash 200 02/06/19 By van 3700
30/06/19 To bal b/f 7530 12/06/19
By petty
cash 90
19/06/19
By
Draycarts 3600
30/06/19 By fixtures 340
7730 7730
FIXTURES A/C
Date Particulars DR. £ Date Particulars CR. £
05/06/19
To office
hand ltd 850 30/06/19 By bal b/f 1250
15/06/19 To cash 60
30/06/19 To bank 340
1250 1250
OFFICE HAND LTD. A/C
Date Particulars DR. £ Date Particulars CR. £
30/06/19 To bal b/f 850 05/06/19 By fixtures 850
850 850
DRAYCARTS LTD. A/C
Date Particulars DR. £ Date Particulars CR. £
19/06/19 To bank 3600 08/06/19 By van 3600
3600 3600
PETTY CASH A/C
Date Particulars DR. £ Date Particulars CR. £
12/06/19 To bank 90 30/06/19 By bal b/f 90
90 90
Y. HENRY A/C
Date Particulars DR. £ Date Particulars CR. £
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21/06/19 To loan 2500 30/06/19 By bal b/f 2500
2500 2500
LOAN A/C
Date Particulars DR. £ Date Particulars CR. £
30/06/19 To bal b/f 2500 21/06/19
By Y.
Henry 2500
2500 2500
b) Trial Balance
TRIAL BALANCE AS AT 30 JUNE 2019
PARTICULARS DR. £ CR. £
Capital 7500
Cash 7240
Van 7300
Bank 7530
Fixtures 1250
Office Hand ltd 850
Petty cash 90
Y. Henry 2500
Loan 2500
TOTAL 18380 18380
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
Carriage inwards 810
Motor expenses 1500
Carriage outward 2400
Rent 4000
Telephone charges 540
Wages and salaries 21000
Insurance 750
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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
Non Current Liabilities
Current Liabilities
Creditors 12000
Shareholder's equity
Capital 25000
Less: drawings 14500 10500
Retained Earnings 121000
Total Liabilities 143500
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REFERENCES
Books and Journals
Petty, R.D. and Mandel, R.P., 2015. Business Entities. Wiley Encyclopedia of Management.
pp.1-8.
Spence, S. and Hyams-Ssekasi, D., 2015. Developing business students’ employability skills
through working in partnership with a local business to deliver an undergraduate
mentoring programme. Higher Education, Skills and Work-Based Learning. 5(3). pp.299-
314.
Steingard, D. and Gilbert, J.C., 2016. The Benefit Corporation: A Legal Tool to Align the
Interests of Business with Those of Society; An Interview with Jay Coen Gilbert, Co-
Founder, B Lab. Business and Professional Ethics Journal. 35(1). pp.5-15.
Schroeder, R.G., Clark, M.W. and Cathey, J.M., 2019. Financial accounting theory and
analysis: text and cases. John Wiley & Sons.
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