Users Of Accounting Flashcards
Internal User
are those individuals inside a company who plan, organize, and run the business. These users are directly involved in managing and operating the business. These include marketing managers, production supervisors, finance directors, company officers and owners .
External Users
are those individuals or organizations outside a company who are interested in its financial information. Examples of these external users are potential investors, suppliers and government agencies.
Questions Asked by Internal Users
“Is cash sufficient to pay bills?”
“Can we afford to give employee pay raise this year?”
“will the company be able to pay its debts as they come due?”
“What is the cost of manufacturing each unit of product?”
“which products line is the most profitable?”
Forms of Business Organization
sole proprietorship, partnership, corporation and cooperative
Sole Proprietorship
business owned and operated by one person
it is not separate from the owner. the business and the owner are inseparable
Advantage Of Sole Proprietorship
- The owner keep all the profit
- The owner makes all the decisions
- It is easy to form and operate
Disadvantages Of Sole Proprietorship
-The life of the business is limited to the life of the owner. Once the owner dies, the business will cease to operate under the name of the proprietor.
-The amount of capital is limited only by the wealth of the proprietor.
Partnership
A business in which two or more persons combine their assets and skills
Advantage of Partnership
- Higher capital because two or more persons will contribute to the common fund.
- It is easy to operate like a sole proprietorship.
- Higher capital because two or more persons will contribute to the common fund.
- It is easy to operate like a sole proprietorship.
- The profit are divided among the partners
- A partner can be held liable for the acts of the other partners.
- In a lawsuit, the personal properties of the partners can be held beyond their contributions and may be used to answer for any liability of the partnership.
Corporations
- A corporation is a business organized as a separate legal entity (artificial person) under the corporation law with ownership divided into transferable shares of stocks.
- Emphasize that it is the law (Corporation Code of the Philippines) that creates a corporation.
-The corporation begins its existence from the date the Articles of Incorporation is approved by the Securities and Exchange Commission (SEC). - The SEC (Securities and Exchange Commission) is the government agency primarily tasked to regulate private corporations in the Philippines.
- The owners are called stockholders or shareholders.
Advantage Of Corporation
- Can easily raise additional funds by selling shares of stocks to the public.
- Shareholders are not personally liable for the debts of the corporation. The extent of their liability is limited to their equity (ownership) in the corporation
Disadvantage Of Corporation
- It is relatively complicated to set up.
- Subject to several legal restrictions as listed in the Corporation Code of the Philippines
Cooperative
- A cooperative is a duly registered association of persons with a common bond of interest, voluntarily joining together to achieve their social, economic and cultural needs.
- The owners are called members who contribute equitably to the capital of the cooperative.
- The members are expected to patronize their products and services.
- The word ‘cooperative’ appears in the name of the entity.
- This form of business organization is regulated by the Cooperative Development Authority (CDA).
Advantage Of Cooperative
- Enjoys certain tax exemption privilege
- Promotes the concept of sharing resources
