Accounting for Business: Analyzing Enterprise Types & Finance Sources

This essay provides a comprehensive overview of accounting for business, focusing on various types of business enterprises, including sole proprietorships, partnerships, and companies. It differentiates between equity shares and preference shares, as well as long-term loans and debentures as sources of long-term finance for public companies. The analysis covers the characteristics, advantages, and disadvantages of each type of business enterprise and financial instrument, highlighting their roles in business operations, expansion, and financial management. Desklib provides this and many other solved assignments to help students excel in their courses.

Accounting For Business
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Table of content
Table of Contents
Introduction......................................................................................................................................3
Task..................................................................................................................................................3
Explain existence of several types of business enterprises along with examples.......................3
Differentiate between the two forms of share capital along with two forms of long term debt
in context of long term sources of finance for public companies...............................................4
Conclusion.......................................................................................................................................5
References........................................................................................................................................6
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Introduction
Accounting for business can be referred a the systematic records that are used in
analysing, interpreting and further presenting the financial information. The process of
accounting can be performed by several people within a business. In case of small business, the
accounting processes are performed by a single individual whereas in large organisations, the
accounting business is performed by various teams (Brown and et.al., 2019).
Task
Explain existence of several types of business enterprises along with examples.
Businesses are established as a part of economic activity with an aim of earning profits in
long run along with wealth maximisation. There are several types of business enterprises and
they have been explained below.
Sole proprietorship- Sole proprietorship is referred as the form of business enterprises
which is owned and operated by a single individual. It is considered as the simplest form of
business ownership wherein the owner is the sole bearer of all the profits, losses as well as the
risks. In the sole proprietorship the tax of the business is considered as the tax payable for the
owner as well.
Partnership- A partnership business is a type of business wherein the business is owned
and operated by several people. There are two forms of partnership, namely general partnership
and limited partnership. A general partnership is where in the partners take the whole
responsibility of the debts and in a limited partnership the partners take the responsibility of
paying of debts of the business. The partnership businesses usually comprise of a partnership
deed in order to avoid the hindrances and conflicts in the business (Axtell, Smith and Tervo,
2017).
Companies- A business enterprise is operated in form of company as well. A business
organisation that operates as a company, tends to allow its owners, partners as well as
shareholders to have a limited personal liability which acts as a safeguard towards the personal
assets of the various stakeholders of the organisation. The companies tend to require extensive
reporting along with record keeping as well as operational processes. The companies operate
separately from their shareholders and in an independent manner. The corporations have various
ways of raising funds like stock options, debentures and several more.
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Differentiate between the two forms of share capital along with two forms of long term debt in
context of long term sources of finance for public companies.
The long term sources of finance are basically the sources wherein the funds are raised
for a long duration which is more than an year. The long term financing is helpful in
modernisation, expansion, development as well as diversification of the several business
operations. There are various sources through which an organisation can raise long term
finances. The long term finances for an organisation can raised with the help of long term share
capital as well as long term debt. The description of various sources of funds have been provided
in the section below (Christ and Burritt, 2018).
Long term financing through share capital can be done with the help of Equity shares as
well as preference shares. Equity shares are the shares that provide voting rights to the
shareholders but the rate of dividend keeps fluctuating as it depends upon the profits of the
organisation. The preference shares are the shares that do not provide voting rights to the
shareholders but they are given preference in terms of giving dividends and also their dividend is
fixed. The repayment of capital in case of equity shareholders is done at the times of wind up of
the organisation which states that the equity shareholders are paid in the end. The repayment of
capital in case of preference shares during the wind up is done before the equity share holders.
The equity shares can not be redeemed whereas the preference shares are capable of redemption.
In case of convertibility, the equity shares can not be converted into preference shares whereas
the preference shares can be converted into the equity shares. The equity shareholders do not
have the rights to receive arrears for the previous years whereas the preference shareholders are
accountable to receive the arrears of the present as well as previous year dividends except in the
case of non cumulative preference shares of the organisation (Hsieh, Ma and Novoselov, 2019).
When an organisation requires huge amount of money during expansion, the organisation
can look upon the ways of long term debts also. The ways in which the long terms debts can be
raised by a business are long term loans and debentures. Debentures are basically the financial
tools through which general public is invited in order to subscribe offers at attractive rates of
interests through certificates that are issues by the organisation. These certificates are termed as
debentures which is a kind of unsecured loan as no collateral is issued on subscription of the
debentures. Long term bank loans is a form of long term source of finance wherein the business
raises finances on which the organisation is required to pay interest at a fixed rate for a specific
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period of time. The loans are not transferable whereas the debentures can be transferred. The
debentures do not require collateral as a security but in order to access loans, the collateral is
necessary (Russell And et.al., 2020).
Conclusion
It can be concluded from the essay that accounting for business is a significant concept in
a business organisation. The report has explained the concept of accounting in a business
organisation along with the various types of business enterprises. The business enterprises hat
have been discussed in the essay are sole proprietorship, partnership as well as companies.
Further, the essay has reflected long term sources of finance and differentiated between the two
forms of share capital and two forms of long term debt as well.
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References
Books and Journals
Axtell, J., Smith, L.M. and Tervo, W., 2017. The advent of accounting in business governance:
from ancient scribes to modern practitioners. International Journal of Business
Governance and Ethics, 12(1), pp.21-46.
Brown, C. and et.al., 2019. Accounting for business adaptations in economic disruption
models. Journal of Infrastructure Systems, 25(1), p.04019001.
Christ, K.L. and Burritt, R.L., 2018. The role for transdisciplinarity in water accounting by
business: reflections and opportunities. Australasian Journal of Environmental
Management, 25(3), pp.302-320.
Hsieh, C.C., Ma, Z. and Novoselov, K.E., 2019. Accounting conservatism, business strategy, and
ambiguity. Accounting, Organizations and Society, 74, pp.41-55.
Russell, H.M. And et.al., 2020. Analysis of compassion in accounting and business students,
overall and by gender. Journal of Accounting Education, 53, p.100684.
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