WEEK 1 Flashcards
- Possible users of accounting information include:
Managers
The bank
Tax inspectors
Investors/ Owner(s) of the business
Define the term: Limited Liability
Shareholders in a company are only liable for company debts to the extent of the value of their shareholding.
What is the process through which financial data treated to create financial reports?
is the process through which financial data :
Recorded
analysed
summarised
provided as information to stakeholders
Current asset (5)
Account receivable ( debtor)
Bank
Cash
Closing stock
Cash in hand
Inventory
Non-current asset ( 7)
machinery
van
plant
land
building
equipment
premises
Current Liabilities
Account payable
Bank overdraft ( Loan short term )
Non-current Liabilities
Loan long term
Loan from A
Nợ tiền A
Loan to A
A nợ tiền mình
Payment from A
A trả tiền mình
Payment to A
Mình trả tiền A
Limited Liability
Shareholders will only lose what they have invested into the business
Unlimited Liability
Owners is personally responsible for the debts of the business
May have to sell personal possessions to repay the debts of the business
Public sector
Run by the government for the people
Funded through taxation
Private Sector
Run by business aims to make a profit
Not for charities
Owners
they review financial information to see how effectively the business is being run and in particular how profitable it is
Suppliers:
Suppliers: need to know that the businesses cashflow is secure and it will be able to pay its debts to the suppliers
Managers
Need to be update on the financial situation of the business to review investment decisions
Return inward
Sale return: trả lại cho business
Return outward
Purchase return : business trả lại cho customers
Sole Trader : advantages
- Few legal restrictions
- Owner has complete control
- Owner is self-employed
Sole Trader : Disadvantages
- Long working hours
- Difficult to borrow from bank
- Unlimited Liability
Partnership : Advantage
- Decision-making shared
- Additional skill
- Cover for holidays
Partnership : disadvantage
- profits are shared
- Disagreement can cause problems
- Unlimited Liability
Private limited company : advantage
- Name ends in ‘ limited ( ltd)
- Control cannot be lost
- Business continues even if shareholders chang
Private limited company : disadvantage
- Higher set-up cost
-profits distributed to shareholders - legal more complex
Public Limited companies: Advantage
- Access to large amount of capital
- Easier to raise additional funds
- Widen business network
Public Limited companies: Disadvantage
- Potential for loss control
