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Accounting 1.1 > Business Structures > Flashcards

Business Structures Flashcards

(61 cards)

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1
Q

What is Limited Liability

A

The Shareholders of the company are not responsible for the debts of the entity should it fail. Personal assets will not be sold to repay the entities debts.
Note: Directors can be personally pursued for business debts if they act inappropriately.

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2
Q

What is Unlimited Liability

A

Unlimited Liability is where owners of the business could be responsible for the debts of the business should it fail. Personal assets may be sold to repay the entities debts.

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3
Q

What is the difference between Business Entities and Incorporated Entities

A

Incorporated Organisations:

  • Members are NOT Owners
  • Profits are not distributed to members
  • Accumulated funds for future NOT Equity of owner
  • No drawings
  • Fundraising for raising cash
  • If closes down funds not distributed to members
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4
Q

What are two advantages of a Sole Trader

A

Advantages:

  • All profits for the owner
  • Flexible work hours
  • Own Boss
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5
Q

What are two advantages of a Partnership

A

Advantages:

  • Greater access to capital than Sole Trader
  • Shares risk, skill and workload
  • Partners liable for tax on profit as opposed to a company which is taxed on profits and shareholders taxed on dividends.
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6
Q

What are two advantages of a Limited Liability Company

A

Advantages:

  • Limited Liability
  • Can borrow by the way of debentures
  • Has perpetual succession
  • Separation of ownership from day to day management of business
  • Large amounts of capital can be raised through shares/debentures
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7
Q

What are two disadvantages of a Sole Trader

A

Disadvantages:

  • Owner takes all responsibility/risk
  • Limited access to funds for expansion
  • Unlimited Liability
  • Operating problems when owner is sick or on holiday
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8
Q

What are two disadvantages of a Partnership

A

Disadvantages:

  • Share profits
  • Unlimited Liability
  • Limited life, on death or a partner the partnership dissolves
  • Partners have joint and several liability, therefore one partners actions can bind the others
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9
Q

What are two disadvantages of a Limited Liability Business

A

Disadvantages:

  • Expensive set up costs
  • Strict legal/reporting requirements
  • Company profits are taxed and the shareholders dividends are also taxed (double taxation)
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10
Q

State 2-3 sources of finance for a Sole Trader

A
  • Capital (Owners)
  • Revenue from sales of a good or service
  • Accounts payable
  • Loans from the banks
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11
Q

State 2-3 sources of finance for an Unincorporated Organisation

A
  • Membership subscriptions
  • Fundraising
  • Donations
  • Loans from the bank
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12
Q

State 2-3 sources of finance for an Incorporated Oraganisation

A
  • Membership subscriptions
  • Fund raising
  • Donations
  • Grants
  • Loans from the bank
  • Debentures
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13
Q

State 2-3 sources of finance for a Partnership

A
  • Partners Capital
  • Accounts Payable
  • Revenue from sale of goods or service
  • Advance form partners
  • Loans from banks
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14
Q

State 2-3 sources of finance for a Limited Liability Company

A
  • Share capital
  • Revenue from sales of goods or service
  • Accounts payable
  • Loans
  • Debentures
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15
Q

Which two entities must have their financial statements audited

A
  • Limited Liabilities Companies
  • Incorporated Organisations
  • This is a disadvantages as it costs more money for an audit
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16
Q

What is the lifetime of a Sole Trader

A

Finishes when owner dies or business is winds up

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17
Q

What is the lifetime of a Partnership

A

Finishes when a partner dies or the partnership resolves

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18
Q

What is the lifetime of a Limited Liability Company

A

Infinite. Going concern

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19
Q

What is the lifetime of an Incorporated Organisation

A

Indefinite. Continues even though members come and go

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20
Q

What is the lifetime of an Unincorporated Organisation

A

Indefinite. Continues even though members come and go

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21
Q

What are two advantages of an Incorporated Organisation

A
  • Limited Liability
  • ## Unlimited Lifetime
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22
Q

What is Unlimited Liability

A

Unlimited Liability is where owners of the business could be responsible for the debts of the business should it fail. Personal assets may be sold to repay the entities debts.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What is the difference between Business Entities and Incorporated Entities

A

Incorporated Organisations:

  • Members are NOT Owners
  • Profits are not distributed to members
  • Accumulated funds for future NOT Equity of owner
  • No drawings
  • Fundraising for raising cash
  • If closes down funds not distributed to members
How well did you know this?
1
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2
3
4
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24
Q

What are two advantages of a Sole Trader

A

Advantages:

  • All profits for the owner
  • Flexible work hours
  • Own Boss
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
What are two advantages of a Partnership
Advantages: - Greater access to capital than Sole Trader - Shares risk, skill and workload - Partners liable for tax on profit as opposed to a company which is taxed on profits and shareholders taxed on dividends.
26
What are two advantages of a Limited Liability Company
Advantages: - Limited Liability - Can borrow by the way of debentures - Has perpetual succession - Separation of ownership from day to day management of business - Large amounts of capital can be raised through shares/debentures
27
What are two disadvantages of a Sole Trader
Disadvantages: - Owner takes all responsibility/risk - Limited access to funds for expansion - Unlimited Liability - Operating problems when owner is sick or on holiday
28
What are two disadvantages of a Partnership
Disadvantages: - Share profits - Unlimited Liability - Limited life, on death or a partner the partnership dissolves - Partners have joint and several liability, therefore one partners actions can bind the others
29
What are two disadvantages of a Limited Liability Business
Disadvantages: - Expensive set up costs - Strict legal/reporting requirements - Company profits are taxed and the shareholders dividends are also taxed (double taxation)
30
State 2-3 sources of finance for a Sole Trader
- Capital (Owners) - Revenue from sales of a good or service - Accounts payable - Loans from the banks
31
State 2-3 sources of finance for an Unincorporated Organisation
- Membership subscriptions - Fundraising - Donations - Loans from the bank
32
State 2-3 sources of finance for an Incorporated Oraganisation
- Membership subscriptions - Fund raising - Donations - Grants - Loans from the bank - Debentures
33
State 2-3 sources of finance for a Partnership
- Partners Capital - Accounts Payable - Revenue from sale of goods or service - Advance form partners - Loans from banks
34
State 2-3 sources of finance for a Limited Liability Company
- Share capital - Revenue from sales of goods or service - Accounts payable - Loans - Debentures
35
Which two entities must have their financial statements audited
- Limited Liabilities Companies - Incorporated Organisations - This is a disadvantages as it costs more money for an audit
36
What is the lifetime of a Sole Trader
Finishes when owner dies or business is winds up
37
What is the lifetime of a Partnership
Finishes when a partner dies or the partnership resolves
38
What is the lifetime of a Limited Liability Company
Infinite. Going concern
39
What is the lifetime of an Incorporated Organisation
Indefinite. Continues even though members come and go
40
What is the lifetime of an Unincorporated Organisation
Indefinite. Continues even though members come and go
41
What are two advantages of an Incorporated Organisation
- Limited Liability - Unlimited Lifetime -
42
What is Unlimited Liability
Unlimited Liability is where owners of the business could be responsible for the debts of the business should it fail. Personal assets may be sold to repay the entities debts.
43
What is the difference between Business Entities and Incorporated Entities
Incorporated Organisations: - Members are NOT Owners - Profits are not distributed to members - Accumulated funds for future NOT Equity of owner - No drawings - Fundraising for raising cash - If closes down funds not distributed to members
44
What are two advantages of a Sole Trader
Advantages: - All profits for the owner - Flexible work hours - Own Boss
45
What are two advantages of a Partnership
Advantages: - Greater access to capital than Sole Trader - Shares risk, skill and workload - Partners liable for tax on profit as opposed to a company which is taxed on profits and shareholders taxed on dividends.
46
What are two advantages of a Limited Liability Company
Advantages: - Limited Liability - Can borrow by the way of debentures - Has perpetual succession - Separation of ownership from day to day management of business - Large amounts of capital can be raised through shares/debentures
47
What are two disadvantages of a Sole Trader
Disadvantages: - Owner takes all responsibility/risk - Limited access to funds for expansion - Unlimited Liability - Operating problems when owner is sick or on holiday
48
What are two disadvantages of a Partnership
Disadvantages: - Share profits - Unlimited Liability - Limited life, on death or a partner the partnership dissolves - Partners have joint and several liability, therefore one partners actions can bind the others
49
What are two disadvantages of a Limited Liability Business
Disadvantages: - Expensive set up costs - Strict legal/reporting requirements - Company profits are taxed and the shareholders dividends are also taxed (double taxation)
50
State 2-3 sources of finance for a Sole Trader
- Capital (Owners) - Revenue from sales of a good or service - Accounts payable - Loans from the banks
51
State 2-3 sources of finance for an Unincorporated Organisation
- Membership subscriptions - Fundraising - Donations - Loans from the bank
52
State 2-3 sources of finance for an Incorporated Oraganisation
- Membership subscriptions - Fund raising - Donations - Grants - Loans from the bank - Debentures
53
State 2-3 sources of finance for a Partnership
- Partners Capital - Accounts Payable - Revenue from sale of goods or service - Advance form partners - Loans from banks
54
State 2-3 sources of finance for a Limited Liability Company
- Share capital - Revenue from sales of goods or service - Accounts payable - Loans - Debentures
55
Which two entities must have their financial statements audited
- Limited Liabilities Companies - Incorporated Organisations - This is a disadvantages as it costs more money for an audit
56
What is the lifetime of a Sole Trader
Finishes when owner dies or business is winds up
57
What is the lifetime of a Partnership
Finishes when a partner dies or the partnership resolves
58
What is the lifetime of a Limited Liability Company
Infinite. Going concern
59
What is the lifetime of an Incorporated Organisation
Indefinite. Continues even though members come and go
60
What is the lifetime of an Unincorporated Organisation
Indefinite. Continues even though members come and go
61
What are two advantages of an Incorporated Organisation
- Limited Liability | - Unlimited Lifetime

Accounting 1.1 (13 decks)

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