ACCOUNTING - SMALL BUSINESS

Question 1

Advantages and disadvantages of the investment option of property…

Answer 1

ADVANTAGE
> Can provide capital gain and and income stream to the investor.
> Can be an easy profitable investment if the right factors are met, such as; good property and good tenants.
DISADVANTAGE
> If no tenants available, the investor will be left paying rent for the property.
> Possibility for dodgy investors.

Question 2

Advantages and disadvantages of the investment option of a bank account…

Answer 2

ADVANTAGE
> Money is readily accessible
> No risk of losing money
DISADVANTAGE 
> Accounts may pay a very low return
> Highly possible that when the return on the bank account could actually be negative after account-keeping fees are factored in.

Question 3

Advantages and disadvantages of the investment option of shares…

Answer 3

ADVANTAGES
> Possibility for greater returns and tax benefits
> Flexibility in owning and selling shares
> Many varieties of shares to buy
DISADVANTAGE
> Investing in shares brings a risk. Depending on how much you spend and what you buy will be your risk.

Question 4

What is the sole proprietorship ownership structure?

Answer 4

A sole proprietorship is a business owned by single individual, operating the business in their own right under their own name or a registered business name. A sole trader ship is not a separate legal entity so the owner has unlimited liability.

Question 5

What is the partnership ownership structure?

Answer 5

A partnership is the business owned by two or more persons (2-20). They share profits and decision-making powers. There is unlimited liability to the owners.

Question 6

What is a proprietary company ownership structure?

Answer 6

A proprietary company is a business that exists as a separate legal entity and is entitled to do business in its own right it is owned by shareholders. A proprietary company has limited liability.

Question 7

Advantages and disadvantages of a sole proprietorship…

Answer 7

ADVANTAGES
> Easy and cheap to start up
> Owner has full control
> Owner receives all profits
DISADVANTAGES
> Owner has unlimited liability and can be forced to sell off personal assets
> The business has a limited life with the owner
> Limited financial source to start with
> Can be a lot of work for one owner

Question 8

Advantages and disadvantages of a partnership…

Answer 8

ADVANTAGES
> Relatively cheap as multiple sources of finance
> Greater access to capital and skills
> Possibility for tax benefits
DISADVANTAGES
> Control is shared which may lead to disagreements and personality clashes
> Unlimited liability
> Profits are shared among all partners
> The business has a limited life

Question 9

Advantages and disadvantages of a proprietary company…

Answer 9

ADVANTAGES 
> Limited liability as there is a separate legal entity
> Greater ability to attract finance
> The life of the business is ongoing
DISADVANTAGES
> Establishment costs are higher
> Higher costs of running and tax
> Difficult to attract additional capital

Question 10

Advantages and disadvantages of the alternative of buying an existing business…

Answer 10

ADVANTAGES
> Proven success record
> All assets, practices and suppliers etc are already established
> Immediate income stream may be available
> there is advice available by previous/ franchise owners
DISADVANTAGES
> Preview success may have been dependent on the previous/franchise owner
> Difficult to change existing procedures
> Must pay for Goodwill
> Existing assets may need repair or even replacement.

Question 11

Advantages and disadvantages of buying a franchise…

Answer 11

ADVANTAGES
> Recognised brand name
> established and proven reputation and procedures
> all equipment necessary to commence operations provided
> bulk buying power through the franchise group
DISADVANTAGES
> High purchased price
> ongoing franchise fees
> strict guidelines for operations
> Competition from fellow franchisees
> Dependence on the operations of the franchisor