Types of business and Types of accounting Flashcards
What are the three different types of business?
Sole Traders, Partnerships and Companies.
Describe a Sole Trader.
A sole trader business is usually small, owned and operated by one individual. The owner is personally liable for any business debts.
Describe a Partnership.
A business that is owned and operated by more than one person. The partners are jointly liable for any business debts, unless the partnership agreement states otherwise. A business like this can be quite large.
Describe a Company.
A company has a separate legal entity distinct from the owners, as the owners of the business are shareholders and are not liable for the debts of the company. Accounts must be prepared in accordance with legal requirements.
What are the two different types of accounting?
Financial accounts and Management accounts.
Describe Financial accounts.
These are prepared mainly for users outside the business, such as shareholders. They must be prepared annually and follow a prescribed format.
Describe Management accounts.
These are prepared for use within the business and can take whatever form is most useful. They are usually prepared monthly.
