Private Limited Companies Advantages and Disadvantages

Private Limited Companies Advantages and Disadvantages m one(a)tary Accounting Is the breeding to earn decisions related to the makeups, it begins with the principles, concepts, and applications of fiscal accounting.Financial Accounting follows a crop of triumphs and commandment cognize as accounting concepts, accounting policies, and procedures akin the entity and prepayments.Financial Accounting explains for us what argon the financial conjure upments, tells us what be the rules of legislation while they are getting prepared, fork overs us how the financial accounts are prepared, helps us to determine how the various fields of tune work together. It also controls tracks of companys financial barter like the cash flow and cash inflow.It put forwards stakeholders with official culture like for Example balance sheet account, reach and loss account, trade account.Sole principal It is owned by barely one person, that has no ex achievement legislation and has one or more employees, their main invention is to make arrive at.Sole Trader AdvantagesThey stick out make decisions easily and rapidlyOwner trick control anything.Less legal formalities.It is simple to designate upSole Trader DisadvantagesLack of capital.They stomach to work and intend hard beca map For Example If the owner is sick, they give non be able to work.Unlimited liability. all(prenominal)iance is among 2 to 20 partners or dealholders that deeds together and lightheaded to dance bandup, the owners share with each separate the meshings 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. in that respect are few paper to work onDisadvantages of a PartnershipLack of goals to be achievedUnlimited liability moolah energize to be divided between the partnersPrivate Limited smart set Is cognize as ( LTD), it must moderate one or more director, they do non need a trading diploma, and it offers limited liability to its shareholders that it places current limits on its ownership.Advantages of Private Limited attach toLimited liability.More undecomposed than the status of a mend trader.Disadvantages of Private Limited CompanyThe potentiometer tax has to be paid.Can non sell shares to human beings.Public Limited Company Is known as PLC , its a company whose shares may be purchased by the public and whose share capital is non 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 umteen legal formalitiesClubs It is the business that is connected from two or more people that has the kindred goal that they ask to achieve. Their main objective is to provide dish ups to the commwholeyCharities 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 ineffectual to pay for their needs and wants.The Advantages of being a CharityThe Charity job can provide advice and learning to assist 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 usually allowed to benefit financially from the charity.Companies strike ( 1985 )Is the act of the congress of the UK, which result 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 parting part of the rules governing companies, it was governed by its own articles of relationship.The act is utilise only to companies that get out 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 police relating to the accounts of company, to make stark naked furnishs, to amend the companies act 1985 with respect 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 make.Partnership Act (1890)Its the relation which exists between persons holding on a business in common with the affect of profit.No touch on is to be charged on drawings.Profits and losses are overlap equally among partners.The relation between members of any company likeIt is not a partnership within the meaning of this actRegistered as a company u nder the companies act 1862Rules for Determining Existence of PartnershipTo circumscribe whether a partnership does or does not exist, you should follow the rulesreefer 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 complete(a) 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 different from the owner at that business. It also can be applied to limited business like the charities.The owners personal spending is not enter in the books at the business. The owners personal dealings 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 t raders, partnership, limited companies, clubs and charities.Going Concern ConceptsIt is the story that business will continue operating in the future except if there a strong evidence or if there a weak evidence, the care for is not interpreted 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 land the business.Accruals (Matching) ConceptsIt is the income that will be received in some 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 little(a) 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. oversight ConceptsIt states that the inventory and the profits should not be expected but also included in the profit and loss account.This concept is kn own 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. trunk ConceptsIt is a way that accounting method 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 systematically from years to years.Money Measurement ConceptsIt shows the transactions that can be utilize in monetary basis 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 damage and the balance sheet that is based to an original cost when t he company enquire it.Duality (Double 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.reliablenessIt is a degree of person, measure, or object.It is outstanding that profit is only save when it has actually been realise. Profits are not regarded as being take in 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 quality of the things that is apply in business.Information in financial statements in a business can be more useful. it is compared with similar information about the same business for some other period of time or with other similar information about other business.Und erstand abilityIts how you understand 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 true and fair viewsConventionsIt is rules and procedures which are followed by all the establishment 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 c an be given in a monetary terms.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 cash amount that is used in your normal time in life.The organization has two methods to choose fromthe straight line depreciationreducing balances distributively 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 cash 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 m ay not pay their bills to the company) , 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 particular(a) 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 appendage will be included in the amount charged to the profit and loss account for the period as part of the cost 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. evaluation of StockIt should be valu ed at the lower cost and to be on the net value to observe with the conservative and caution concept.It has deuce-ace main methods of valuing stockFIFOLIFOAVCOEach will work 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. single 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 ordinarily encountered convention is the historical cost conventionThis requires 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 hands 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 materiality is an important issue for auditors of financial accounts.