Private Limited Companies Advantages and Disadvantages

Private check Companies Advantages and DisadvantagesFinancial Accounting Is the breeding to sack up decisions related to the memorial tablets, it begins with the principles, concepts, and applications of financial count oning.Financial Accounting follows a exercise of rules and statute cognise as invoice concepts, accounting policies, and procedures like the entity and prepayments.Financial Accounting explains for us what be the financial statements, tells us what are the rules of legislation while they are getting prepared, shows us how the financial accounts are prepared, abets us to understand how the various fields of business utilization together. It excessively keeps tracks of companys financial business like the currency flow and cash inflow.It provides stakeholders with official information like for Example balance sheet account, boodle and loss account, trading account.Sole Trader It is owned by besides geniusness person, that has no ex sterilise legislati on and has one or more employees, their main aim is to make bread.Sole Trader AdvantagesThey feces make decisions easily and quicklyOwner can control anything.Less legal formalities.It is simple to discipline upSole Trader DisadvantagesLack of capital.They have to work and think hard beca employ For Example If the owner is sick, they will non be able to work.Unlimited liability.Partnership is between 2 to 20 partners or dole outholders that alone works together and easy to apparatus, the owners share with each other the scratch or losses of their business, and their main aim is to make profit.Advantages of a PartnershipIt is easy to setup by the deed of partnershipMore capital is available.There are few paper to work onDisadvantages of a PartnershipLack of goals to be achievedUnlimited liability internet have to be divided between the partnersPrivate check play along Is known as ( LTD), it must have one or more director, they do non need a trading diploma, and it offers limited liability to its shareholders moreover it places certain limits on its ownership.Advantages of Private Limited CompanyLimited liability.More serious than the status of a sole trader.Disadvantages of Private Limited CompanyThe corporation tax has to be paid.Cannot sell shares to public.Public Limited Company Is known as PLC , its a company whose shares may be purchased by the public and whose share capital is not less than a statutory minimum, and must have minimum 2 directors.Advantages of a Public Limited Companygreater borrowing powerthe shareholders have limited liabilityshareholders can sell their shares freely to publicDisadvantages of A Public Limited CompanyThe personal touch may be lostPublished accounts have to be preparedDifficult to control and manageToo many legal formalitiesClubs It is the business that is connected from two or more people that has the identical goal that they want to achieve.Their main objective is to provide services to the communityCharit ies It is known as the charities that we know for foundation like Dubai cares.Their main objective is to help other peoples or countries that are unable to pay for their needs and wants.The Advantages of macrocosm a CharityThe Charity task can provide advice and information to advocate a charity administration.Charities are not liable to pay Corporation Tax which is charged on clubs, societies and voluntary organisations.The Disadvantages of Being a CharityLimited rules that are carried on by charities.Trustees are not generally allowed to benefit financially from the charity.Companies actuate ( 1985 )Is the act of the congress of the UK, which will help the companies to register and to set responsibilities of the companies, their secretaries and directors.The act was the instance of consolidation of many other pieces of company legislation, and was one constituent part of the rules governing companies, it was governed by its own articles of relationship.The act is applied solit ary(prenominal) to companies that will form into a legal corporation under it, or under older companys acts.In the act limited liability partnerships, sole traders, and partnerships were not governed by it.Companies Act (1989)Is an act to amend the law relating to the accounts of company, to make new viands, to amend the companies act 1985 with lever of powers to get information, to create new provision with respect to the registration of charges in the company and to modify the law related to companies, to rephrase the fair trading act 1973, to allow provision to be made.Partnership Act (1890)Its the relation which exists between persons holding on a business in common with the view of profit.No interest is to be charged on drawings.Profits and losses are shared equally among partners.The relation between members of any company likeIt is not a partnership within the meaning of this actRegistered as a company under the companies act 1862Rules for Determining Existence of Partnersh ipTo determine whether a partnership does or does not exist, you should follow the rules critical pinnacle property, Joint tenancy, tenancy in common, common property, or part ownership does not of itself create a partnership, whether the owners do or do not share any profits made by the useThe sharing of gross does not create a partnership, whether the persons sharing returns have or have not a common right or interest in any propertyAccounting ConceptsBusiness Entity ConceptsIt is a separated business and completely contrasting from the owner at that business. It also can be applied to limited business like the charities.The owners personal spending is not recorded in the books at the business. The owners personal transaction appear in the book is when the introductions capital or makes drawings.MaterialityIt is a rule which applies to the materials that are not always included in accounting rule its applied to sole traders, partnership, limited companies, clubs and charities.Go ing Concern ConceptsIt is the statement that business will continue operating in the coming(prenominal) barely if in that respect a strong evidence or if there a weak evidence, the value is not taken from their break-up value which is the amount that they can sell it in a slow way.In final accounts of a business one of them prepares on the basis that there is no intension to close polish up the business.Accruals (Matching) ConceptsIt is the income that will be received in well-nigh trading, lost profit and loss accounts. They should be given out from time to time to be paid. It also allows some people to go against other accounts if the amounts were so small that will be misled, in another words its when we have use something in a period of time. E.g. bill phone, gas bill, and water bill.Prudence ConceptsIt states that the inventory and the profits should not be expected but also included in the profit and loss account.This concept is known as conservation, If we applied this concept ensures that the account present a practical pictures of the state of the business. This concept is applied for making provisions for reduction of debts and stock valuation.Consistency ConceptsIt is a way that accounting manner uses it to there business, and the business has to keep on using it from time to another.In some areas of accounting a choice of method is available, and when it will be chosen, then they should apply it consistently from years to years.Money measuring stick ConceptsIt shows the transactions that can be used in monetary terms and in using measuring unit for financial reports.The account at a business only records the information which can be expressed in monetary terms. The value of a good manager that contains loyal work force, high stall morale, will make great benefits to the business.Historical Cost ConceptsIt is the account that asset the price and the balance sheet that is based to an original comprise when the company require it.Duality (Dou ble Entry) ConceptsIt is only one account that is joined together.For every transaction there is aspect in accounting that is made on the basis. A giving and a receiving is known as Dual Concept of all transaction. This is known as double entry.Principles of Relevance ConceptsIt is a fact that is known to be gathered from one point of view and keep it.ReliabilityIt is a degree of person, measure, or object.It is important that profit is only recorded when it has actually been earned. Profits are not regarded as being earned when a customer places an order for goods. Profit is regarded as being earned at the time of goods or services pars to the customers.ComparabilityIt is the forest of the things that is used in business.Information in financial statements in a business can be more useful. it is compared with similar information about the homogeneous business for some other period of time or with other similar information about other business.Understand abilityIts how you underst and the others and be able to talk and communicate to them.Information should not be omitted from the financial statements because it is believed it is too complex for users to understand financial statements must be capable of being understood by the users of those statements.PrinciplesThey have two types in UK and USIn US they have a lot of rules but when they prepare for their account they use the rule book and if it doesnt cover the rules, the rule book is approved to be used.In UK there is a general law applied to the accounting practice, but the only difference between US and UK that in UK they have an over riding requirements, the account has to be required it is called accredited and fair viewsConventionsIt is rules and procedures which are followed by all the organization it also guides the organization for the preparation of their accounts.Rules and Procedures Which Apply To Financial StatementsFinancial statement shows only the business that can be given in a monetary te rms.DepreciationIt is a company that has the free choice in choosing the company policies, procedures, and also it will affect on the reduction of the bills amount that is used in your normal time in life.The organization has two methods to choose fromthe straight line depreciationreducing balances to each one method of them will result with a different amount of depreciation being charged against the profits.Bad DebtsThe balance sheet reflects the amount of the money that the organizations owing it from sales, there is a lot of debtors that may not be able to pay the full amount. SoThe organizations need to allow a percentage of bad depts.The organization can choose what percentage they want and when to write the bad debts to make a provision, at the end it will affect the over all profit recorded.Provision for Doubtful DebtsIt is a small amount that is set aside for something very expensive or something will happen later in the future (Debtors who may not pay their bills to the c ompany) , they usual state the percentage of the great trade debtors.In future accounting, the profit periods would be twisted if the entity suffered a whole series of bad debts. So it seems cautious to allow for the chance that some debts may become bad.AccrualsIt is an amount due for a service provided during a incident accounting period but still not paid for at the end of it.We should include them in our accounting before the year ends to show the true and fair views the organization need to ensure that this accounts is complying with accounting concepts.The addition will be included in the amount charged to the profit and loss account for the period as part of the hail of the service provided.PrepaymentsIt is an amount paid in cash during an accounting period for a provision that will be provided in a later period.Prepayments made will be deducted from the amount charged to the profit and loss account.Valuation of StockIt should be valued at the lower cost and to be on the ne t value to observe with the conservative and caution concept.It has three main methods of valuing stockFIFOLIFOAVCOEach will lead to different value and will affect the profit level.The Similarities and Differences of Sole Trader and PartnershipSole TradersIt is owned by only one person.One has to keep careful evidence if he is self-employed.If the business falters his personal assets are likely to be liquidated.They dont need to divide there profit.Its easy to set up.PartnershipsIts owned by two or more people together.Profits are shared either equally or as per the terms given.If profits are to be shared, so are the liabilities too.Partners can profit from limited liability and collect tax advantages.Application of Accounting Conventions and RegulationsWe have in accounting a concept called true and fair view which help to ensure that accounting information is presented accurately and consistently.The most commonly encountered convention is the historical cost conventionThis requ ires transactions to be recorded at the price ruling at the time, and for assets to be valued at their original cost.Under the historical cost convention, therefore, no account is taken of changing prices in the economy.And there are other conventions in accounting we can summarize as followsMonetary Measurement Like workforce skill, morale, market leadership, brand recognition, quality of managementAnd the accountants should not account for items unless they can be quantified in monetary terms.An important convention.. The concept of physicalness is an important issue for auditors of financial accounts.