Types Of Buisnesses

Question 1

What is a sole proprietor (1)

Answer 1

A form of enterprise owned by one person (the owner)

Question 2

What are typical characteristics of an enterprise (5)

Answer 2

• formation procedure
• ownership
• legal personality
• acquisition of capital
• profit or loss sharing
• liability of income tax
• liability of owner in event of insolvency

Question 3

What are they disadvantages and advantages of sole trade (6)

Answer 3

Advantage:
-owner gets all profits for remuneration of enterprise 
-formation procedure is very simple
 •bank account opened in owners name
 •if needed, trade license obtained

Disadvantage:
- sometimes sole trader employ a manager
- owner liable for any loss (bankrupt)
- determines if enterprise continues to exist
 • if owner cant run it, closes down
• if owner dies, business dies

Both:
- owner contributes capital in money/assets to business
• capital provided herself/ external financing. You borrow money from financial institutions (bank)
- the owner and business is a single legal person
• owner pays profit taxes through the business or personsl capacity

Question 4

What is a service enterprise (2)

Answer 4

• They dont buy or sell manufactured goods.

- They meet people’s needs using goods to perform services

Question 5

What are the 2 types of services enterprises and a short description (4)

Answer 5

• personal services: attend personal needs e.g. medical practitioners, legal professionals, architects, accountants, teachers, actors
• Commercial services: delivery services, insurance services, financial services, garden services, repairs (plumer)

Question 6

Discuss a trading enterprise (4)

Answer 6

Buy goods(at cost price) with the aim of reselling it to enterprises/customers at a higher price (selling price) to make profit

Variety of goods bought and sold at a higher price of
• e.g. cafe= buys goods from wholesales/manufacturers and sell it at a higher price

Question 7

Discuss the accounting cycle (6)

Answer 7

1. Transaction
2. Source Document
3. Journals (CRJ + CPJ)
4. General Ledger
5. Trial Balance
6. Financial Statements