HC1010 Accounting for Business Decisions: T2 2019 Report

This report focuses on accounting principles and theories relevant to business, using a scenario where Tim wants to purchase a delicatessen in Sydney. The report explores different forms of business organization, including sole proprietorship and partnerships, and discusses how these choices affect the availability of finance. It covers fund-raising strategies and the importance of security. Furthermore, the report highlights how accounting and non-financial information, such as financial position statements, income statements, and expert insights, assist in making informed business decisions. It also outlines the essential skills and accounting knowledge required to manage a business effectively. The report concludes with recommendations, emphasizing the importance of partnership and venture capital financing for Tim's purchase decision, along with the accounting information and skills needed for success.

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Contents
Introduction......................................................................................................................................2
Options of the forms of organisation...............................................................................................3
Sole proprietorship.......................................................................................................................3
Partnerships..................................................................................................................................3
Choice of organisation affects the availability of finance...............................................................4
Fund raising and security.................................................................................................................5
Accounting information and non-financial information assist Tim in making decisions in
purchasing business.........................................................................................................................6
Skills and/or accounting knowledge will he need to manage the business.....................................6
Conclusion and recommendations...................................................................................................8
References........................................................................................................................................9

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Introduction
The aim of the assignment is to focus on the accounting principles as well as theories that are
related to the business. In this report, the scenario has been presented in which Tim, a friend
wants to start with a business. Tim is looking to purchase a delicatessen in Sydney. There is no
great success of the shop, which is already present in the market. Now, he does not have savings
and looking to borrow a large amount of money to finance. Being accounting student, the report
includes the advice for Tim.

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Options of the forms of organisation
In the market, Tim can adopt wide range of options for the organisation, which are explained
along with the advantages, and disadvantages of every option for Tim.
Sole proprietorship
It is business form, in which business is owned by only one person; Tim can alone make
purchase of the delicatessen in Sydney.
Advantages
 Easiest and least expensive
 Profit of business is attained by single owner
 Complete control of business remains in one hand (Schroeder, Clark and Cathey, 2019)
Disadvantages
 Unlimited liability and remain responsible for all debt
 Disadvantage in raising funds
Partnerships
Tim can select for the partnership in which two or more people can share the ownership of one
business (Schroeder, Clark, and Cathey, 2019). In this, they can search for the right partners for
them to purchase the business together.
Advantages
 High ability to raise the funds

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 Easy to establish
 Profit is shared among the partners
 Benefit of risk sharing
Disadvantage
 Profit of business distribute among partners
 Decisions are taken by partners collectively (Pratt, 2016)
Choice of organisation affects the availability of finance
Yes, the choices of business and legal structure lead to the influence in availability of finance
and raising the funds.
Sole proprietorship: - In terms of financing, operations as a sole proprietorship narrow the
options to a degree. Lenders in the business can choose for the personal credit profile with the
motive to identify whether the business or person get qualifies for loan that is take for the
business (Maynard, 2017). This means that if Tim selects the sole proprietorship Tim needs to
qualify while taking the loans from lenders that can be bank or any other legal financial institute.
The strong personal credit scope will lead to easy credit for the business that varies in other form
of business.
Partnership: - The ownership of the business gets share in two people who become the partners
and this will lead to rise in flexibility with the financing. If Tim selects for the partnership then it
becomes easier to get qualify for the loan as well as line of credit by making use of business
credit profile (Penman, 2016). In the partnership, Tim will find the equity financing also, which
is an alternate route partnership that can be adopted. As Tim is not sufficient with the saving, this

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makes Tim to bring the new, collaborates on board, and receives the shares in the business in
terms of proportion to the amount that they will invest as capital.
Fund raising and security
Tim can raise the funds in the different forms that vary from sole proprietorship and partnership
of the business. Along with this, Tim needs to provide the security while raising the funds from
the market.
If Tim, adopt the sole proprietor then they can raise the funds through borrowing from the
relatives and friends, Grants for Sole Proprietors, Conventional Bank Loans, Credit Card
Financing and many other options (Sarokin, 2015). In these options, Tim requires to maintain
security that they need to provide for financing. This includes the good strong personal credit to
qualify in eyes of banks, relatives, friend, and many others. Along with this, there will be need of
collateral of the personal assets that is basis of loan approval.
If in case there is partnership form that is opted by Tim, include different ways of raising the
funds that include venture capital funding, crowd funding for business, small business grants,
loan for business and many others (Mazzocchi, 2017). In the partnership also, lenders of funds
will review the personal credit of every partner involved in the business that is security. Along
with this, collateral of the personal assets as well as their agreement is shown which is
considered as the security of business.

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Accounting information and non-financial information assist Tim in
making decisions in purchasing business
The accounting and non-accounting information that will assist Tim for making decision in
buying the business is given below -
Statement of Financial Position: - The financial position statement reflects the position of
company, which contribute effectively in making the right decision. The good financial position
shows that the business shows make the purchase of business (Mazzocchi, 2017).
Income Statement and cash flow: - The income statement shows the profit and loss attained by
Tim; in case there is profit then Tim can purchase the business and make a strong decision.
Along with this, the flow of cash is also evaluated which will show liquidity of business and this
supports in making the right decision. If in case Tim, business is not able to maintain the cash
then they should think for buying the business.
Expert Insights: - Expert insights help the business to get the advice for the potential
opportunity of success of business as well as threats for purchasing the decision.
Facts and features for feasibility analysis: - Facts as well as features are essential for Tim to
consider while making the final decision. Purchasing business need the proper feasibility
analysis with the help of facts and features that makes the business to decide that they will
purchase business or not (Penman, 2016).
Skills and/or accounting knowledge will he need to manage the business
The skills as well as accounting knowledge that is required to manage the business include -

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 Leadership abilities
 General business knowledge
 Communication skills
 Specialized experience
 Up-to-date technology expertise

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Conclusion and recommendations
In the end, it can be concluded that Tim need to raise the funds for their purchase decision, which
is discussed in this report. Tim should select the partnership as the form of business that helps
them to increase the opportunity of funds sourcing. Along with this, in the partnership form of
organisation they should adopt for the venture capital financing. This will help Tim in making
the right decision for purchasing the delicatessen in Sydney. In the end, the report includes the
accounting information that will be used to support the decision made by Tim. Along with this,
the skills and abilities are also discussed in the report.

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References
Maynard, J. (2017) Financial accounting, reporting, and analysis. Oxford University Press.
Mazzocchi, R.A. (2017) How does an inventor find an investor or partner? Raising funds to start
a company. Surgery, 161(5), pp.1183-1186.
Penman, S. (2016) Conservatism as a defining principle for accounting. The Japanese
Accounting Review, 6(2016), pp.1-16.
Phillips, F., Libby, R. and Libby, P. (2015) Fundamentals of Financial Accounting. McGraw-
Hill Education.
Pratt, J. (2016) Financial accounting in an economic context. John Wiley & Sons.
Sarokin, D. (2015) Sources of Finance for a Partnership [Online]. Available from:
https://smallbusiness.chron.com/sources-finance-partnership-3663.html [Accessed on 10th
September 2019]
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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