Recording Business Transactions

RECORDING BUSINESS
TRANSACTIONS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
A) Different types of business organisations and its advantages.................................................1
b) Main Users of accounting information and the use of financial information to others...........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 the present times there are different types of organisation operating in the market.
These organisations have different benefits and flaws. The profit based organisation structure
included sole proprietor, partnership and corporations. Every organisation have to prepare the
statement of profit and loss for knowing the profitability and position of the company. Financial
statement of the company are prepared for analysing the performance and operational efficiency
of company. It helps users in making decisions about their investment.
PART 1
A) Different types of business organisations and its advantages
Sole Proprietorship
In this type of business the owner makes all the decisions for the business and all the
responsibility regarding the decision is on the owner only. The owner do not have to ask anyone
else for making decisions like which place to operate his business, who should be employed,
what product to sell etc., since all the responsibility and risk is taken by the owner all the profit
generated or the losses incurred will be taken by the owner only (Kennan, 2016). The major
problem with sole proprietorship is that if the business incurs any losses then he or she is going
to bear it all by themselves, as they have unlimited liabilities toward there business and they may
even have to sell there personal asset to pay there business debt.
Advantages
 Sole proprietor is not dependent on other for activities related to business.
 Profits of business are not shared with others.
 It is not required to follow heavy regulatory requirements for establishment of business.
Partnership
A partnership business is owned by 2 or more individual. In this type of business the whole
business is being operated by all the partners. Firstly raising finance as there are more than one
individual working the finance is available more easily as compared to the sole proprietorship as
each partner brings there capital into the business. Again, there is again no separation between
the firm and the partners so if the business is sued all the partners will be sued (Chané and
Killander, 2019). The major problem is that even if there are losses incurred by the mistake of
any one partner the consequences will be beard by all the partners.
Advantages
1

 Risks will be shared by all the partners it is not to be born by single person.
 There is an increased availability of resources.
 It is easy to incorporate a partnership firm.
Corporation
Company acts as a legal entity from its owner which is its biggest advantage. The other major
advantage of operating as a company is that they can easily raise finance as they have the option
of raising finance through public issue. The owners are not sued if the company is sued as the
company operates as a separate legal person. The problems being faced as operating as a
company is that there are strict regulatory restrictions being imposed on this corporation by the
government and non compliance with these laws and regulations can cause the company large
amount of fine (Goffee and Scase, 2015).
Advantages
 It is a separate legal entity therefore all risks and rewards are limited to company.
 All the income generated belong to the corporation only.
 In corporation ownership is freely transferable.
b) Main Users of accounting information and the use of financial information to others
They are required for decision making purposes by the investors as well as business
executives. 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
Owners
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 (Flower and Ebbers, 2018).
Lenders
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.
Suppliers
2