Test bank and solution of accounting 9th (2)

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Test bank and solution of accounting 9th (2)

Solutions Manualto accompanyAccounting 9ebyJohn HoggettLew EdwardsJohn MedlinKeryn ChalmersAndreas HellmannClaire BeattieJodie MaxfieldWileyCO John Wi

Test bank and solution of accounting 9th (2)iley & Sons Australia, Ltd 2015Chapter 2: Financial statements for decision makingCHAPTER 2 FINANCIAL STATEMENTS FOR DECISION MAKINGDISCUSSION QUESTIO

NSI SOLUTIONS1.Explain the basic differences between a sole trader (or single proprietorship), a partnership and a company. Discuss the factors that n Test bank and solution of accounting 9th (2)

eed to be considered tn selecting an appropriate structure for Cynthia's beauty services business.The three basic business structures arc:Sole traders

Test bank and solution of accounting 9th (2)

are where individuals conduct business iu thcữ own capacity. They would be contributing thcữ own capital or equity to the business and would be borro

Solutions Manualto accompanyAccounting 9ebyJohn HoggettLew EdwardsJohn MedlinKeryn ChalmersAndreas HellmannClaire BeattieJodie MaxfieldWileyCO John Wi

Test bank and solution of accounting 9th (2) the bank, would have access to their own personal assets to repay the outstanding debt. This business structure is suitable for small operations with

small staff and turnover. The sole trader has sole responsibility and control for the business operations and activities. I his structure is suitable Test bank and solution of accounting 9th (2)

for small businesses which require minimal capital to set up and have relatively low running costs and risk.A parlnersliip is two or more persons in

Test bank and solution of accounting 9th (2)

business together, operating under a partnership agreement which may or may not be a formally written document. Partnerships have the advantage over s

Solutions Manualto accompanyAccounting 9ebyJohn HoggettLew EdwardsJohn MedlinKeryn ChalmersAndreas HellmannClaire BeattieJodie MaxfieldWileyCO John Wi

Test bank and solution of accounting 9th (2)siness. The partnership is treated as a separate entity for accounting purposes but is not a separate legal entity. This means that the underlying ass

ets and liabilities of a partnership belong to the individual partners in the proportion agreed upon as part of the partnership agreement. Therefore i Test bank and solution of accounting 9th (2)

f the business activities prove to be unsuccessful, creditors have the right to access the personal assets of the individual partners in the event the

Test bank and solution of accounting 9th (2)

business is unable to repay any outstanding debt, l or this reason, the partnership structure is usually used where there is a low element of risk to

Solutions Manualto accompanyAccounting 9ebyJohn HoggettLew EdwardsJohn MedlinKeryn ChalmersAndreas HellmannClaire BeattieJodie MaxfieldWileyCO John Wi

Test bank and solution of accounting 9th (2)professionals including accountants and lawyers.The company is a separate legal entity with ownership of a company attributed to shares held. The owne

rs of the company arc known as shareholders. The advantage of this business structure is that, as a separate legal entity, the assets and liabilities Test bank and solution of accounting 9th (2)

belong to the company. In the event the business is unable to repay its debt, the creditors only have access to company assets for repayment of the de

Test bank and solution of accounting 9th (2)

bt. The investment in the company by its shareholders is limited only to the shareholders* capital contribution, i.e. what the shareholder pays for th

Solutions Manualto accompanyAccounting 9ebyJohn HoggettLew EdwardsJohn MedlinKeryn ChalmersAndreas HellmannClaire BeattieJodie MaxfieldWileyCO John Wi

Test bank and solution of accounting 9th (2)mployees and has a higher business risk. The disadvantages include higher set up and ongoing costs and possible reduction in control over the business

operations where shareholders are not directly involved in the business operations.© John Wiley & Sons Australia, Ltd 20152.1Solutions .Manual to acc Test bank and solution of accounting 9th (2)

ompany Accounting 9e by Hoggerr er alFactors (hat Cynthia needs 10 consider in selecting an appropriate structure for her business include:•simplicity

Test bank and solution of accounting 9th (2)

in selling up the businessSole traders and small partnerships are easier to set up compared to companies.•establishment costsCompanies arc more expen

Solutions Manualto accompanyAccounting 9ebyJohn HoggettLew EdwardsJohn MedlinKeryn ChalmersAndreas HellmannClaire BeattieJodie MaxfieldWileyCO John Wi

Test bank and solution of accounting 9th (2)s and partners arc personally hable for their business’ debts, including those resulting from lawsuits or the actions of other partners. If unlimited

liability is a concern, then Cynthia may want to consider setting up a company instead of being a sole trader or partnership.•taxTax reporting require Test bank and solution of accounting 9th (2)

ments for companies arc far greater than for sole traders and partnerships.•control of the businessAs an owner of a sole trader. Cynthia would have a

Test bank and solution of accounting 9th (2)

complete control over her business.

Solutions Manualto accompanyAccounting 9ebyJohn HoggettLew EdwardsJohn MedlinKeryn ChalmersAndreas HellmannClaire BeattieJodie MaxfieldWileyCO John Wi