ACCT6003 Financial Accounting Report: Xiaojing's Business in Australia

This report provides a comprehensive analysis of financial accounting principles within the context of a business setup in Australia. It begins by examining the differences between sole proprietorships and partnerships, highlighting the advantages and disadvantages of each structure. The report then delves into the process of forming a company in Australia, including registration, selecting a company name, adhering to the Corporations Act 2001, choosing shareholders and directors, and selecting the principal place of business. The role and responsibilities of company directors are also discussed. Furthermore, the report explores funding options for businesses, including fixed-interest debt and equity financing. It emphasizes the advantages of smaller private business groups, such as operational flexibility and cost-effectiveness. The report also addresses potential disadvantages, like limited financial resources. The report concludes by discussing the Australian Stock Exchange (ASX) listing requirements, including minimum shareholder numbers, free float shares, and financial size criteria.

Running head: FINANCIAL ACCOUNTING
Financial Accounting
Name of the Student:
Name of the University:
Author’s Note:

1FINANCIAL ACCOUNTING
Table of Contents
Part A...............................................................................................................................................2
Part B...............................................................................................................................................3
Reference.........................................................................................................................................5

2FINANCIAL ACCOUNTING
Part A
 In case of a sole proprietorship the proprietor is solely responsible for all the activities
carried on in a business and the contrasting debt levels in a company. The debt
undertaken by the firm on behalf of the sole proprietor should be honoured by the
proprietor and would be liable for paying off the debt for fulfilling the obligations. The
financial risk associated with the firm is to be borne by an individual proprietor. On the
other hand partnership business is formed by two or three partner who mutually agree to
carry on a business activity thereby realizing the profit and loss arising from the same in
accordance with the partnership agreements. Distribution of profit and loss and efficient
management of resources are some of the key benefits of a partnership business.
However fast and quick decision are the key advantages of a sole proprietorship. Thus, it
is recommended that Xiaojing addresses the following matters while starting a business
in Australia (Smallbusiness.chron.com 2017).
 It is essential that the firm is registered firstly using ASIC Form 201, Available on ASIC
Website and by paying the application fees. The company name must be selected by
Xiaojing or must be according to the Australian Accounting Number reflecting the legal
status whether the same is a proprietary or PTY limited company. The rules and policies
of the company should be in accordance with the “Corporations Act 2001” or
“Constitution of Australia”. Selecting the shareholders and the directors of the company
will be the next step and choosing the share structure of the company. Finally selecting
the principal place of business and relevant other paperwork will be the key process for
successfully setting up the proprietorship for Xiaojing (Sarina et al. 2015).

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 It is the right of the director of a company exercise independent judgement and exercise
reasonable care, skill and diligence when dealing with the matters of the company.
However, the director is also obliged to promote the success of the company.
 Xiaojing can fund the operations from various banks in Australia providing fixed interest
bearing debt and other sources like equity financing by issuing ordinary shares.
Part B
 Flexibility in the operations of the business and greater flexibility with changing business
condition is the key advantage of smaller business group. The costs associated in the
form of overheads is also lower in the case of smaller private group companies. Faster
decision making process and focus on the operation of the product has been the key
focus. However there also several disadvantages in a company in the form of limited
financial resources, limited leverage and risks diversion is limited for Xiaojing in Smaller
Private Business.
 Xiaojing can consider equity financing as well as issue fixed interest bearing bonds or
borrow money from Australian Banks. Xiaojing should optimally look after equity
financing after it gets listed in Australian Stock Exchange as a prominent source of
financing. Xiaojing should also look after an optimal capital structure so that the financial
risk of the company stays limited (Business.gov.au 2019).
 The Australian Stock Exchange listing requirement gives the minimum requirement for
companies for listing in the ASX. The number of shareholders should be minimum 3000
which are non-affiliated investors and the free float shares should be at least 20% of the
total shares. In terms of the size of the company should have reported an aggregate of
AUD 1million in the last three-years of time-frame (Legislation.gov.au 2018). The

4FINANCIAL ACCOUNTING
tangible assets of the company should also be worth of a minimum AUD 4 Million or an
AUD 15 Million of Market Capitalisation (Asx.com.au 2018).

5FINANCIAL ACCOUNTING
Reference
Asx.com.au. (2018). Listing Requirements. [online] Available at:
https://www.asx.com.au/listings/listing-with-asx/listing-requirements.htm [Accessed 23 Mar.
2019].
Business.gov.au. (2019). Finance for your business. [online] Available at:
https://www.business.gov.au/new-to-business-essentials/series-four/finance-for-your-business
[Accessed 23 Mar. 2019].
Legislation.gov.au. (2018). Corporations Act 2001. [online] Available at:
https://www.legislation.gov.au/Details/C2018C00424 [Accessed 23 Mar. 2019].
Sarina, T., Fici, A., Jensen, A., Patmore, G. and Tortia, E., 2015. A Comparison between
Australian and Italian Co-operative Law. Cooperative Enterprises in Australia and Italy:
Comparative Analysis and Theoretical Insights, pp.21-36.
Smallbusiness.chron.com. (2017). The Advantages of a Corporation Over a Partnership and
Sole Proprietership. [online] Available at: https://smallbusiness.chron.com/advantages-
corporation-over-partnership-sole-proprietership-19197.html [Accessed 23 Mar. 2019].