Question and losses, and what are the rights of

Question 1

 

 

 

Partnership Companies

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Partnership
business means any kind of business which is owned by two or more people who
are agreed to share all the gains losses profits and benefits, this kind of
company is called as a partnership. Partnership Company can be started by shake
hand or oral or written. But, for every each partner’s protection, the most
suitable way is to have a written or printed partnership agreement that
including all the necessary agreements. This written or printed agreement
should include the percentage of dividing profits and losses, and what are the
rights of each partner, what are the responsibilities of each partner, and what
happens if a partner leaves from the business or what happens when a partner
newly joined to the business and amount of capital that each partner is
investing to the business, and how the assets and capital should be divided
among partners if the business is closed. All the things are changing at every
second, so it is good that having signed document that including all of these
things.

 

 

 

Strengths of business partnership

 

 

 

·        
Capital – If there are more
number of partners they can invest more capital to the business.

·        
Flexible – Partnership
businesses are easier to form and easier to run. Owners can decide the way that
how the business should run.

·        
Easy
to make Decisions
– Partners can easily take decisions according to the situation of the
business.

·        
Limited
external regulations-
When compared to the other types of businesses partnerships has less
regulations.

·        
Responsibility
is shared –
Partners can share the responsibilities among them. It will allow to partners
to make their abilities better.

 

 

 

Weaknesses of business partnerships

 

 

 

·        
Disagreements – There can be
disagreements between partners. It will be a disadvantage when making
decisions.

·        
Unlimited
liability –
Partners are subjects to unlimited liability which means each partners shares
liability and all the risks including financial risks of the business.

·        
Taxation – This is one of a
major disadvantage of partnerships. Partners must pay tax each year.

·        
Profits
should be shared – All
the earned profits should equally share among partners.

 

 

 

 

 

 

 

Limited Companies

 

 

Limited
company is an one of a legal business company type. In these limited companies
the control of the companies and the ownership of the companies are in the
hands of different kind of people. The owners of these limited companies are
called as shareholders and members of the company. Simply the liability is
limited to this type of companies. Limited companies allow their entrepreneurs
to keep finances and assets separate from the business. This means the
shareholders who have invested money to the company are only responsible for
the money which they have invested to the business. They are no more
responsible than they invested. This is good way to do investment without risk
to the personal wealth.

 

 

Strengths of limited companies

 

 

·        
Limited
liability for shareholders
– As earlier mentioned the shareholders are liable only for their invested
money.

·        
Tax
advantage and tax
– These limited companies are only taxed on their profits.

·        
Great
Security – The limited Companies are totally separate from the directors and
shareholders. Because of that their personal assets are not at any risk.

·        
Respect – Setting up a ‘Limited
‘company it gives the directors an air of respect.

·        
Pensions – Limited companies can
fund their employees a legitimate expense.

 

 

Weaknesses of limited companies

 

 

·        
Cost
is high – Limited companies are expensive to establish.

·        
Financial
status are public – Company accounts and records are can be accessed by any
person.

·        
Restrictions
– There should be restrictions regarding company name.

 

 

 

Recommendation

 

 

As
my point of view, I suggest to Fernando and Perera to establish a Limited
company. As earlier mentioned they can have better advantages like limited
liability, tax advantages, low risk, respect and better professional status by
establishing a limited liability company. If they establish a partnership
business they will have to face many disadvantages.

 

 

 

 

 

 

 

 

 

 

 

 

 

Question 2

 

 

 

Distinctions/Differences between Financial
Accounting and Management Accounting

 

 

Both
of financial and management accounting are important for businesses. But those
are served for different purposes of business. Accounting is used to determine
the future plans and review past performances of companies.

 

Financial
accounting is using to present company finance health to the outsider people
such as stake holders. The audience of the financial accounting is stake
holders, board of directors and other investors. Financial accounting is
showing the how the company has performed in exact time period. And financial
accounting must be made under annual basis.

 

Management
accounting is using by managers to make decision by concerning company day to
day transactions. Management accounts are based on current and future trends of
company. Management accounts are presented internally and financial accounts
are presented externally.

 

Financial accounting needs kept records and it is needed to prove that
financial accounts are correct. Management accounts are deals with estimates
and verifications.