Introduction
Accounting is the process of work where an accountant or account related personnel keeps the company’s financial accounts. The process of work includes recording, storing, sorting, retrieving, summarizing and presenting in financial reports. The purpose of accounting is to provide information that is needed for making of economic decisions and to help in defining the financial position of a company. Accounting is very important to a company.
Accounting Equation
The Accounting Equation also called the balance sheet equation is the most basic principle used in accounting. It relates to three categories of accounts, assets, liabilities and owner’s equity. It states that during the period, the value of assets a business owns is
Cost of Goods Sold, the cost incurred in the manufacture or procurement of inventory is charged to the income statement of the accounting period in which the inventory is sold. Therefore, any inventory remaining unsold at the end of an accounting period is excluded from the computation of cost of goods sold. Government GrantsIAS 20 Accounting for Government Grants and Disclosure of Government Assistance requires the recognition of grants as income over the accounting periods in which the related costs (that were intended to be compensated by the grant) are incurred by the
For example, a sole proprietorship is only asks for pay an annual fee to the Companies Commission of Malaysia to renew its business from year to year. Besides, no audit and annual application requirement is needed .This kind of business is owned by only one individual and the business is managed by the sole proprietor. It can be assisted by the family members of sole proprietor or some staff. Advantages of it include sole proprietor easy to manage the business because account of whole business can handle easily by the sole proprietor compared to the private limited company or public limited company. Sole proprietorship also is the cheapest. Normally, sole proprietor of small business will automatically do its own accounts. They do not find the big accounting firm likes PriceWaterhouseCoopers or Ernst&Young to provide their professional in accounting or accounting information into the business’s account. This is because the fee is expensive and it will become a great strain on the resources of the sole proprietorship. In a nutshell, a sole proprietorship normally will be the simplest and cheapest compared to another two types of business. Disadvantages of it include this type of business will be so dangerous when it is setting-up a lot of liability. If the business fails, the sole proprietor is required to personally settle all the liabilities on behalf of whole business.
A sole trader is a one man business. There is just one manager. Although they are the sole manager and owner they can employ staff to work for them. They can employ as many as they want to work for them. A sole trader is self employed, this means they work for themselves, they employed themselves, they for nobody. Sole traders trade with others. They may trade expertise, an example of this would be a business consultant taking on a big job and needing an extra hand just for that job, so this person may employ a person with the expertise he/she needs. Because a sole trader is the sole owner he/she keeps all the profits, unless he/she has any employees. The owner of the business makes all the decisions, he/she will not have anyone telling them what to do. When one wants to set up a sole trader business it is relatively easy. There is little paper work involved bec...
Under the accrual basis of accounting, expenses are matched with revenues on the income statement when the expenses expire or title has transferred to the buyer, rather than at the time when expenses are paid. The balance sheet is also affected at the time of the expense by a decrease in Cash (if the expense was paid at the time the expense was incurred), an increase in Accounts Payable (if the expense will be paid in the future), or a decrease in Prepaid Expenses (if the expense was paid in
Sole Proprietorship: This a type of organizational form “where there is no legal distinction between the business and its owner”. ( ) Are easy to start, as well as relocate. There is complete autonomy over every aspect of the business and 100% of the profit is retained by the owner and only taxed once. Although there is often a high tax rate on the profit and the capitol needed to start or grow the business can only come from the sole owner or their personal means of credit. Because the business and the owner are legally the same entity there is unlimited liability to the owner to honor all contracts. Also due to the lack of legal separation the business ceases to exist upon the death of the owner.
A sole proprietorship is a business owned and controlled by a single individual. There are more sole proprietorships than any other type of business available (Lau, 2011). It is a simple type of business to set up, as well as simple to terminate. The proprietor has the freedom to determine operating hours, what services or goods to provide, where it operates, and what contracts to enter into without needed to consult another party. With full control, however, comes full liability. A proprietor is personally liable for all financial obligations whether they be debts from company operations or restitution ordered to be paid from third party suits. It can also be difficult to secure financing for a sole proprietorship as banks look at the business as an individual. Often, banks will treat loans to proprietorships as personal loans to the proprietor and require collateral.
Financial accounting is the analysis, classification, and recording of financial transactions and reporting such information to respective users especially external users who use the information to make decisions about their engagements with the entity. In financial accounting general purpose financial statements are used for external reporting. The public by standards imposes the development of the statements through respective national professional bodies, International Accounting Standards Board and respective company Acts for various nations.
Sole tradership is when the business is fully owned and managed by one person, though others can be employed to help run the business. As the sole traders only financial income is from the business and/or bank loan, they do not have the resources to expand and cover regional or national areas. These types of businesses are located in the small business sector and usually cover local areas. Such businesses could be hairdressers, corner shops or market stalls etc. Sole traderships have unlimited liability so if the business fails to pay its debts the financial responsibility falls on the owner/s to pay the debts in full even if they have to sell their business, personal possessions and assets.
In this task I am going to describe the purpose of accounting, why is it compulsory for businesses and organisations to keep a record of all accounts such as “profit/loss,” the amount of cash spent on “stock”, “bills”, “wages” and numerous other things related to the business that money is spent on . Accounting also covers the cash situation, sales levels, stock levels and credit given to customers as well as their bad debts.
Accounting is the pillar of every company to measure its growth, loss, revenue , capital, its really specify the real terms in foam of figures and sometimes in tables, in accounting there are certain rules are obtained to make more accuracy while playing with figures.
3. Convenience – The sole proprietor is his own boss. He does not report to anybody when making company decisions. No third party or outside criticism/disapproval if wrong choices are made. No business charter from the state, or company regulations to regulate or reduce his authority. The sole proprietor can at his own will, expand the business operations, give it out on contract or outsource it. He can seize/ignore business opportunities, sell or liquidate the business or even relocate to another place.
Accounting aids the government and organisations in decision making for their financial stability. This numerical data helps solve real life problems and contributes to how the economy and businesses perform.
An accountant makes sure that the Nation’s firms are run efficiently, the public records are kept accurately, and that taxes are paid properly and on time (“Accountants and Auditors”). Accounting is the study of how a business tracks their income, assets, expenses, and many other things for a period of time. They also do many other things like quality management, tax strategy, and health care benefits management (“Welcome to Careers in Accounting”). An accountant is crucial to the success of a business, without one the business tends to fail.
Accounting is the compilation of financial information for use in making economic decisions. BOOKKEEPING provides the basic accounting data, by systematically recording such day-to-day financial information as revenue from the sale of products or services; expenses of business operations such as the cost of merchandise sold; and overhead expenses such as rent, wages, and so forth. Accounting principles determine which financial events and transactions should be recorded in the bookkeeper's ledgers, journals, and computer printouts. The analysis and interpretation of these records is the primary function of accounting.
The definition of a sole proprietorship is essentially a business that is run by one person and owned by that person as well. Specifically, a sole proprietorship is separated from the other business entities because of the specific the legal dynamics between the business and the owner of the business. Moreover, because of this factor, sole proprietorships are usually easy to both form, maintain as well as dissolve if need be. In a New York Times article, the authors expressed that small businesses are typically sole proprietorships and as such, this is why it was selected as the business entity (1). Furthermore, the aforementioned reasons allowed for a rather rapid decision on the basis that with this entity, there is an ability of the owner to run it how they see fit.
Accounting is so important in our modern society. It serves a variety range of place in our society. It serves a variety range of place in our soceity, from school to hospital, from business firm to government agencies. It's also the main force in regulation of taxation and industrial activity. It serves a great aspects on the development of mass-production systems, any way, it's a very important term in our modern soceity.
Accounting itself is a system that people has been using for thousands of years, the system records financial information about a person or business, businesses use it in order to be able to keep and track their financial accounts and other financial information in a safe and efficient way. (Brooks, 2012)