LSC UoS BA Business: Accounting for Business - Sources of Finance

This report provides an analysis of business accounting and long-term financing options. It begins with an introduction to business accounting, its importance in recording, analyzing, and presenting financial information, and the role of accountants in business growth. The report then discusses the different types of companies, including sole traders, partnerships, private limited companies, and public limited companies, and their reliance on internal and external sources of finance. The core of the report focuses on long-term financing, defining it as financial instruments exceeding one year. It explores various sources of long-term financing for each type of business, such as bank loans, equity shares, debentures, and mortgages. The report highlights the differences in financing options available to different business forms and concludes by emphasizing the importance of long-term financing for business growth. The report references key accounting principles and financial statements.

Business Accounting

Table of Contents
Introduction-................................................................................................................................................3
Analysis of long-term financing-.................................................................................................................3
Conclusion-.................................................................................................................................................5
References-..................................................................................................................................................5

Introduction-
In this report, business accounting is discussed. It is the process of recording, analyzing and
presenting the financial information. Business can track its operations through accounting.
Accountant helps in growth of the business. Work of accountant is to analyze the financial
records and takes decision which helps in growth. Small business accounting includes tax filing,
drafting of financial reports and bookkeeping. Accounting gives information about income and
expenses. It is of three types- cost accounting, managerial accounting and financial accounting.
Knowledge of preparing financial statements and accounting is very necessary for making
decisions. Three main financial statements are income statement, balance sheet and cash flow
statement.
In this report, sole traders, partnership, private limited companies and public limited companies
are discussed. All these companies rely on the internal and external sources of finance. Internal
and external factors affect the company and its financing. Business can raise fund from different
sources. All the sources are discussed in the report.
Analysis of long-term financing-
Long-term financing of a company can be defined as financial instrument which exceeds more
than year. For example- loans, bonds and lease. All these are long term financing source. Every
company needs finance for growth of the company. Finance is the most important thing for
operations of the business.
Sole trader- It is a person who runs his own business. These types of business do not have any
legal identity. Sole trader has total control over its business. Individual can control expenses of
its business. He does not need anyone’s permission before taking any decisions. Business model
is very simple of a sole trader.
Partnerships- As the word suggests, partnership is an agreement between two parties. These
parties can be two individual or two companies. This agreement is in written form. Both of these
parties invest money in business; profit and loss is divided equally between them. There are four
types of partnerships in business which are- general partnership, limited partnership, limited
liability partnership and public private partnership.

Private Limited companies- These are the business entities which has private ownership. It is
widely used way to run a business. Private limited companies are not listed companies in stock
exchange. Such companies cannot trade its shares publicly. There is limitation of having 50
shareholders only. Some examples of private limited companies are accountant, lawyer and
dentist etc.
Public Limited companies- Rules and regulations of such companies are very tight. Companies
which are listed on London stock exchange are known as PLC. There is no limit of shareholders
in public limited companies. It has limited liability of shareholders. Main disadvantages are plc is
very expensive it requires £ 50,000. Accounting and financial reporting is very complex.
Long-term financing-
Business Forms External Long-term financing sources
Sole Traders Main sources of long term financing for sole
traders are bank loans, lease and hire purchase,
asset sales and credit lines from bank.
Partnerships Partnership firm can do long-term finance by
equity shares, bank loans, lease and hire
purchase, trade credit, bank overdraft, factoring
and term loans.
Private Limited For private limited companies long term
financing can be done by shares, debenture and
loans etc.
Public Limited Public limited companies mainly do long term
financing by mortgages of fixed assets and
different forms of debt capital.
From the above table it can be observed that there are different sources of long-term financing of
different business forms. Loan can be taken by any business form. It is widely used long-term
financing source used by companies. Financing sources for public limited companies are

different from other business forms. Such companies can raise fund by mortgaging the fixed
assets and can take debt from banks.
Conclusion-
From the above report, it can be said that long term financing is very important for every
organization or business. Company must have some financing sources so it can leads to growth
in future. In this report, different types of companies are discussed such as sole traders, private
limited companies, public limited companies and partnership. Businesses can raise fund by
various sources and all the financing sources are discussed in the report. Hence, it can be said
that financing in any business can be done by different types.
References-
 Fujita, Y., 1968. An analysis of the development and nature of accounting principles in
Japan. University of Illinois at Urbana-Champaign.
 Chan, J.L., 2001. Global government accounting principles. Public Management,
Accounting Standards and Evaluation Models, pp.152-163.
 Mitchell, F. and Reid, G.C., 2000. Problems, challenges and opportunities: the small
business as a setting for management accounting research. Management Accounting
Research, 11(4), pp.385-390.
 Gul, F.A., 1991. The effects of management accounting systems and environmental
uncertainty on small business managers' performance. Accounting and business
research, 22(85), pp.57-61.