Business Flashcards
(42 cards)
What is the definition of accounting?
The language of business
What is the Accounting Entity Concept?
A term stating the business and the owner are 2 separate entities
What is the Accounting Period Concept?
States that the life of a business is divided into arbitrary time periods e.g end of financial year
What is the Monetary Concept?
Transactions are recorded in dollars and cents
What is Historical Cost Concept?
Transaction are recorded at the cost that the object was bought at the time of purchase e.g. the price of something could change overtime but we don’t know the true cost until it is sold.
What is Growing Concern Concept?
The operation of a business is expected to continue over an indefinite period if time
How many owners for a sole trader?
1
What are the two types of liability?
Limited / Unlimited
What is Limited Liability defined as?
The liability of debts of the enterprise is limited, including to owners of shares in the company
What is Unlimited Liability defined as?
If the business is unable to pay its debts, then the sole trader is sued, not the business (significant risk for owner)
What are some advantages of sole traders?
You’re the boss, keep all the profits, maximum privacy, easy to change legal structure
What are disadvantages of sole traders?
Unlimited liable debts, can be hard to retain employees, taxed as a single person, life of business is limited
How many owners does a partnership generally have?
2-20
Is partnership businesses Limited or Unlimited liability?
Unlimited
What are some advantages of partnership businesses?
More people = more ideas, business easy to establish, more capital available, greater borrowing capacity, income splitting opportunity
What are some disadvantages of partnership businesses?
Unlimited liability, risk of disagreements, each partner liable for debts if one cannot afford
How many shareholders does a private company range from?
2-50
How many shareholders does a public company range from?
5+
What are advantages of a company?
Limited liability, more capital, ownership and management can be separated, continual existence
What are disadvantages of a company?
Costly and time consuming to set up, double taxation, restricted by regulation in companies act
Who can private companies sell shares to?
Restricted to families or small groups, not the general public
What must be added at the end of a private company’s name?
Protietry / PTY
Where do public companies sell shares?
Stock Exchange Market
Are public companies controlled by a board of directors elected by shareholders?
Yes
