T3 2019 HC1010: Accounting for Business Decisions Report

This report, prepared for the Accounting for Business unit, addresses key accounting concepts to support Rob in starting a bakery in Melbourne. It examines the forms of business organization (sole proprietorship and partnership), their advantages, disadvantages, and financial implications. The report highlights the importance of accounting and non-financial information, including financial statement analysis (balance sheet, income statement, and cash flow statement) and environmental, social, and governance (ESG) factors. It also discusses the skills and knowledge required to manage the business, emphasizing the need for accounting software proficiency and regulatory compliance. The conclusion recommends a partnership structure for Rob, given his limited funds and the potential benefits of shared expertise and capital, offering a comprehensive overview of the financial and operational considerations for Rob's business venture.

1/11/2020
Running head: ACCOUNTING
Accounting for Business

ACCOUNTING 1
Table of Contents
Introduction................................................................................................................................2
Forms of Organization for Business.......................................................................................2
Partnership..........................................................................................................................2
Sole Proprietorship.............................................................................................................2
Advantages and Disadvantages of Partnership.......................................................................3
Advantages..........................................................................................................................3
Disadvantages.....................................................................................................................3
Advantages and Disadvantages of Sole Proprietorship..........................................................3
Advantages..........................................................................................................................3
Disadvantages.....................................................................................................................4
Effect of the choice of the organization on the availability of finance..................................4
Raising Required Finance.......................................................................................................4
Security required....................................................................................................................5
Accounting Information Required by Rob in taking decisions of purchasing business.........5
The need for Non-Financial Information...............................................................................5
Skills and/or Accounting Knowledge require to manage the business..................................6
Conclusion..................................................................................................................................6
References..................................................................................................................................8

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Introduction
This assignment aims to strengthen and extend the understanding and knowledge of the main
accounting topics by supporting Rob in starting a business in Melbourne. In this assignment,
the key decisions for starting a business on behalf of Rob will be taken in order to support
him in successfully commencing the business. The decisions that will be taken in the
following sections are related to the form of organization that Rob needs to adopt, their
advantages and disadvantages. Besides this, this report is also highlighting the effect of the
choice of the organization on the availability of finance for Job business, how he can raise the
funds, what accounting and non-financial information required to start the business, etc.
Forms of Organization for Business
The forms of organization for a business that Rob can select are Partnership and Sole
Proprietorship.
Partnership
A partnership is said to be a business organization form under which owners hold the
unlimited liability for the business actions. The business owners invest their time as well as
funds and have a proportional share in the profits and loss. In this type of business, there can
be limited partners too, who work on contributing only funds but do not take any part in the
daily operations (Glasby and Dickinson, 2014).
Sole Proprietorship
A sole proprietorship is an independent business that is managed and handled by a single
owner in which income tax is paid on the earned profit in the business. It is considered to be
one of the easiest kinds of businesses that can be established because of limited regulations
by the government (Boyd, Epstein and Holtzman, 2014).

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Advantages and Disadvantages of Partnership
Advantages
Source of Capital – As per the case of Rob, it is known that he has limited funds for starting
a bakery in Melbourne, but if he chooses to start a business in partnership then the funds can
be arranged by another partner, which will reduce the borrowing in the business.
Specialization – If a partnership business has more than one general partner, it increases the
possibility of the success of the business as different people with different skill sets can
manage the business in a better way and improve the overall performance (Miller and Jentz,
2010). It is known that the bakery that Rob desire to purchase has not been a great success,
hence, if there will be two or more partners, they can work on improving the performance and
image of the shop.
Disadvantages
Instability – This form of organization may end on the solvency, lunacy, or death of the
partners. This can also end if one of the partners ask to dissolve the partnership or the court
command to dissolve it due to the wrongful act of any of the business partner (Tasmania
Government, 2019).
Advantages and Disadvantages of Sole Proprietorship
Advantages
The sole proprietorship advantage is that this is one of the easiest forms of business to set up
in comparison to other forms. Besides this, the owner of the sole proprietorship holds
complete ownership and control of the business (Miao, 2012). As per the definition of this
form of business organization, it can have a single owner who is entitled to losses and profits
of the business.

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Disadvantages
The main disadvantage of this business is the possible revelation to liability. Under this form
of business, the owner is liable for all types of obligations or debts of the business
(McEachern, 2017).
Effect of the choice of the organization on the availability of finance
Business finance is said to be the science and art of handling the money of the business. The
role performed by finance in the business is to ensure that there are enough funds available to
operate the business (Bazley, Hancock and Robinson, 2014). Therefore, it is a fact that the
choice of the form of business impacts the availability of finance. As it is known that Rob
does not have enough funds to invest in the business due to which if he selects to start sole
proprietorship business, then there is the possibility that he has to depend on high borrowings
for which he also has to mortgage his private property. But if he plans to get into a
partnership business then the involvement of two or more partners will reduce the burden of
funds on Rob.
Raising Required Finance
Partnership and sole trader hold a number of sources to arrange the funds from and some of
them are specified below:
Partnership – Under this form of business organization, Rob can arrange funds from sources
like sale of assets, retained profits, working capital, investment by venture capital investors,
etc.
Sole Proprietorship – Under this form of business organization, Rob can arrange the funds
from sources like bank loan, personal savings, sale of assets, searching for an angel investor,
asking for support from family and friends for investment, etc. (Ventura, 2011)

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Security required
The security that Rob needs to provide while arranging funds for sole proprietorship and
partnership is collateral assets that he owns. Besides this, he needs to prepare a detailed and
attractive plan of the business while seeking funds from different investors.
Accounting Information Required by Rob in taking decisions of purchasing business
The accounting information that Rob requires in order to take the decision of purchasing the
bakery store in Melbourne is how to analyze the financial statement of a business. The
financial statements about which the business owner needs to have knowledge are balance
sheet, income statement, and cash flow statement (Robinson, Henry and Pirie, 2015). If Rob
will not gain this information then he can get into huge trouble as purchasing a loss-making
business without complete information can result in making the investment useless. If he will
have the idea of how to analyze the financial statement of the business then he can make the
decision whether or not in the future the business will make profits or not. Besides this, it also
helps them in identifying the mistakes that businesses made in the past and how it can be
resolved in the coming period (Epstein, 2018).
In addition to this, Rob also needs the information related to ratios as it can help in
identifying the liquidity position, profitability and growth position of the bakery store in
Melbourne.
The need for Non-Financial Information
The important non-financial information that Rob require for purchasing the business is the
impact of specific business on the environment, society, and human rights. This information
is also termed as ESG or environmental, social, and governance information (Hebb, Hawley
and Hoepner, 2015). If Rob will lack in these types of information then he cannot survive in
the market because he will not be able to act in a responsible manner and will also unable to
take corrective actions to make updates or changes in the business that is negatively

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impacting the society, employees, or environment. In addition to this, Rob also needs to have
a complete understanding of the policies and strategies applied to the successful operations of
the business. If the owner of the business lacks in understanding this information then they
may fail in exploring the market and serving their target market (Rezaee, 2019).
Skills and/or Accounting Knowledge require to manage the business
The accounting skills and knowledge that Rob requires to effectively manage the business is
preparing the accounts of the business and filling the tax returns. Besides this, as discussed
above Rob also require an understanding of analyzing the financial statement of the store in
order to have a complete update of what is happening in the business and whether it is
making profits or losses. Considering the quick updates and development in the technological
field, due to which Rob needs to gain the knowledge of some of the accounting software like
Tally, ERP, Zoho Books, etc. that needs to be installed in order to have quick and easy
interpretations of complex calculations, data mining, etc. (Lewis, 2014). Further, he has to
gain knowledge of earning national certification from the country’s responsible body in order
to survive in the market.
Conclusion
The above report has been framed in order to provide support to Rob in taking the decision
related to purchasing a bakery shop in Melbourne with limited funds. Considering this
situation and different aspects of both the forms of business organizations that are sole
proprietorship and partnership, it can be concluded that starting a partnership business will be
beneficial as well as profitable for Rob. This is being said because Rob has limited funds and
investing in a sole proprietorship will be expensive in comparison to the partnership business.
Under sole proprietorship business, he has to borrow funds, but under the partnership, he can
contact with a partner who can invest in the business in return of proportionate share in the
profit earned. In addition to this, involve a partner in the business will also increase the

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success possibility as different partners have different skills that support providing different
ideas for the growth of the business. Besides this, it has been said that when two minds work
together on a project, they get two ways towards growth.

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References
Bazley, M., Hancock, P., and Robinson, P. (2014) Contemporary Accounting PDF 1st ed.
Australia: Cengage Learning.
Boyd, K., Epstein, L., and Holtzman, M.P. (2014) Accounting All-in-One For Dummies 1st
ed. U.K: John Wiley & Sons.
Epstein, L. (2018) Reading Financial Reports For Dummies 3rd ed. U.K: John Wiley & Sons.
Glasby, J., and Dickinson, H. (2014) Partnership Working in Health and Social Care: What
Is Integrated Care and How Can We Deliver It? 1st ed. U.S: Policy Press.
Hebb, T., Hawley, J.P., and Hoepner, A.G.F. (2015) The Routledge Handbook of Responsible
Investment 1st ed. U.S: Routledge.
Lewis, J. (2014) The Book You Need Before You Buy That Accounting Software: How Find,
Buy and Implement the Best Accounting Software Solution For Your Business 1st ed. Evolve
Systems Distribution Pty Ltd.
McEachern, W.A. (2017) Contemporary Economics 4th ed. U.S: Cengage Learning.
Miao, B. (2012) A Comparative Study of Legal Framework for Single Member Company in
European Union and China. Journal of Politics and Law, 5(3), 1-12.
Miller, R.L., and Jentz, G.A. (2010) Cengage Advantage Books: Business Law Today: The
Essentials 9th ed. U.S: Cengage Learning.
Rezaee, Z. (2019) Business Sustainability, Corporate Governance, and Organizational
Ethics 1st ed. U.K: John Wiley & Sons.
Robinson, T.R., Henry, E., and Pirie, W.L. (2015) International Financial Statement
Analysis Workbook 3rd ed. John Wiley & Sons.

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Tasmania Government (2019) Partnership – advantages and disadvantages [Online].
Available from https://www.business.tas.gov.au/starting-a-business/choosing-a-business-
structure-intro/partnership-advantages-and-disadvantages [accessed 11 January 2020]
Ventura, J. (2011) Law For Dummies 2nd ed. U.K: John Wiley & Sons.