ACCT6003 Financial Accounting: Evaluating Business Structures in AU

This report provides an analysis of the financial accounting processes involved in different business structures, focusing on partnerships and companies in the Australian context. It examines the benefits, requirements, and limitations of partnerships, comparing them with sole proprietorships and companies. The report also outlines the accounting reporting and regulatory requirements for companies in Australia, including the need to maintain financial records, prepare financial statements, and comply with ASIC regulations. The analysis concludes that while companies offer certain advantages, the higher legal and filing requirements, along with potential double taxation, make partnerships a potentially more suitable business structure for some businesses. Desklib is a great platform to find similar solved assignments and study tools.

Running head: FINANCIAL ACCOUNTING PROCESS
Financial accounting process
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1FINANCIAL ACCOUNTING PROCESS
Table of Contents
Introduction................................................................................................................................2
Benefits of partnership...............................................................................................................2
Requirements of partnership......................................................................................................2
Limitation of partnership............................................................................................................2
Comparison with other company structure................................................................................3
Accounting reporting and regulation requirement of companies...............................................3
Better among sole trader, partnership and company..................................................................3
Conclusion..................................................................................................................................4
Reference....................................................................................................................................5

2FINANCIAL ACCOUNTING PROCESS
Introduction
Partnership business is the specific type of relationship that is legally formed through
agreement among 2 or more individual for carrying out the business as co-owners. It is a
form of business with various owners those have made investment for the business
(Galbraith, 2014).
Benefits of partnership
Various advantages associated with the partnership businesses are –
 The owner receives the entire profits
 Start-up procedure is easy and start up cost is low as filling fees are not required.
 Documents required for the partnership businesses are very few
 Owners are liable to pay the income tax only on his individual income (Becker,
Kugeler & Rosemann, 2013).
 Owners are free to take their decisions regarding the operation of business
Requirements of partnership
If Xiaojing starts partnership business he shall have 2 or more owners who will be
known as partners. The partners will share the losses and profits as per the agreement deed.
All the partners shall have written agreement for partnership that includes the regulation and
rules of business.
Limitation of partnership
Various limitations associated with the partnership businesses Xiaojing may be are as follows
–

3FINANCIAL ACCOUNTING PROCESS
 Xiaojing and other partners will only be responsible for the liabilities incurred in the
business. Therefore, if the business incur any loss or does not have sufficient asset to
pay off its liabilities, creditors may take away their personal assets.
 Business may dissolve upon death of Xiaojing unless there is any successor or the
business is sold to someone else (Becker, Kugeler & Rosemann, 2013).
 Ability of Xiaojing to raise fund is limited which in turn may limit the business size
Comparison with other company structure
If Xiaojing wants to form a company or sole proprietorship as against the partnership,
the sole proprietorship will be simplest form of business structure that may operate and
greater flexibility of management, fewer taxes and fewer controls on legal aspects. However
Xiaojing alone is liable for the debts and liabilities of the business personally. On the other
hand, the company form of business is of more complex in form of structure. The company
has specific rights, liabilities and privileges. Further the company structure may yield
business. However, those benefits are offset by other obligations like reduced personal
control or licensing fees (Schell, 2017).
Accounting reporting and regulation requirement of companies
As per the requirement of accounting standard the companies are required to maintain
and prepare the financial records, the financial reports and statements like balance sheet,
income statement, cash flow statement and changes in equity statement and present these in
the annual general meeting. Further, the reports shall be audited lodged with the ASIC
(Austrade.gov.au, 2018). Further, the companies are required to report to ATO (Australian
Taxation Office), ASX (Australian Securities Exchange) and ASIC (Australian Securities and
Investment Commission).

4FINANCIAL ACCOUNTING PROCESS
Better among sole trader, partnership and company
As compared to sole proprietorship and partnership business, company requires much
more legal and filing requirements for starting up. Further, the fees required for starting up a
company is higher than the partnership or sole proprietorship business. The companies
further require registering itself with each state while it intends for making business
transactions. This is not required for partnership or sole proprietorship business (Peirson et
al., 2014). However, Xiaojing and partners are personally liable for the business liabilities.
On the contrary, the company owners that the shareholders are not personally liable for the
company obligations. Xiaojing and partners are personally responsible for filing of taxation
whereas the company owners are subject to the double taxation that is when the taxes are
filed for companies and for personal profits.
Conclusion
Based on the above discussions it can be concluded that among various forms of
business like sole proprietorship, partnership and company, the liabilities for the company are
much higher as compared to sole proprietorship and partnership. Further, accounting
regulation, filling requirement and fees requirement for companies are high. Therefore, the
best for of business structure is among all is the partnership form.

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Reference
Austrade.gov.au. (2018). Financial reporting in Australia - Austrade . [online] Available at:
https://www.austrade.gov.au/International/Invest/Guide-to-investing/Running-a-
business/Understanding-Australian-business-regulation/Financial-reporting-in-
Australia [Accessed 24 Jun. 2018].
Becker, J., Kugeler, M., & Rosemann, M. (Eds.). (2013). Process management: a guide for
the design of business processes. Springer Science & Business Media.
Galbraith, J. R. (2014). Designing organizations: Strategy, structure, and process at the
business unit and enterprise levels. John Wiley & Sons.
Peirson, G., Brown, R., Easton, S., & Howard, P. (2014). Business finance. McGraw-Hill
Education Australia.
Schell, J. M. (2017). Private equity funds: Business structure and operations. Law Journal
Press.