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·       
Partnership

The uniform Partnership Act Define a
partnership as “An association of two or more persons to carry on as co –
owners of a business for profit”

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Strength

1.      Easy
to start

It is easy to start partnership as well as sole
proprietorship. The rules and regulations that are about to start partnerships
are not so complex.

 

2.      Due
to more partners more capital can be accumulated than sole trader.

 

3.      Risk
/ Liability/losses divided among partners.

 

4.      More
effective decisions can be taken collectively. Different skills and ability of
partners can be utilized for the partnership. Therefore they can take more
effective decisions by considering partners ideas.

5.      Few
Legal Requirements. There are no widespread government rules and regulations on
the partnership. Only limited legal requirements apply, such as licence to be
obtained from area wise.

Weakness

1.     
Unlimited liability

All the partners are personally liable for
the debt of the business.

2.     
Uncertain life

A partnership can be over as a result of
partner death, bankruptcy or acting against the agreement.

 

3.     
Interactive Representation ( Mutual Agency)

Every partner is treated as agent of other
partners. Each partner is liable for the action of other partner’s .the
improper results of one partner’s worst offence would also effect to all the
other partners in the business.

 

 

 

 

4.     
Windup the partnership is difficult.

Although a partnership can be easily started
but it is not very easy for a partner to leave or split the partnership. The
procedures to follow such situations are complex.

5.     
Possibility of interpersonal conflict.

Difference of opinions may arise among the
partners leading to disruptions of business.

6.     
Difficult to make quick decisions.

7.     
Complexity of profit sharing

This will not be an issue of all partners who
contributed to the capital, time and decision making equally. But it doesn’t
happen actually.

Limited
Company

·        
According to the Companies Act, NO.07 0f 2007 A Limited company is a
company that issues shares, the holders liability to contribute to the assets
of the company, if any, specified in the company’s articles as attaching to
those shares.

Strength

1.      More
money available for the investment. Very large amount of finance can be
obtained by issues shares, specially public limited companies.

2.      Share
holders have normally limited liability. Their risk is generally restricted to
the amount that they invested in the company when buying a share of it.

3.      Since
large finance is available company can offered to do large scale business and
enjoy the economics of scale.

4.      LC
has separate legal personality from its owners, so a company can own property
& make contracts ect.

5.      Company
has a going concern.

 

Weakness

1.     
Can’t be easily established and there is formal procedure to set up n
business.

2.     
Affected by many legal requirements.

Because of limited liability, the finance
statements of most limited companies have to be audited and the published for
the shareholders.

3.     
Shareholders have little practical power, other than to sell their
shares, although they can vote to sack the directors.

4.     
Should pay tax under the name of the business.

5.     
Cannot maintain close relationship with the customers.

 

As shown above, it seems that both
partnerships and limited companies have advantages and disadvantages .a
decision between operating partnership or a limited company is comparative. If
they start a partnership their liabilities are unlimited (boundless).this means
partners could lose
more than just his investment in the business. In case of the assets of the business are
not enough to pay off its debt, personal assets of the partners would have to be used to pay
business debts. But the biggest benefit of limited company
is reduce risk for investors, thanks to limited liability. Shareholders are
responsible only to the amount that they have invested in the company.

In comparison to a partnership limited
company can accumulate more capital than partnership.becasuse limited company
can obtain more capital by issues of share .specially public limited company. Another
plus point is limited companies have continuity of existence and also legal
personality separate from its owners. Even if one shareholder dies, bankrupt,
sell the shares not issue for the continuity of the business. But when comes to
the partnership, partnership can be over as a result of partner death,
bankruptcy or acting against the agreement.

So considering above reasons, I suggest them
to start a limited company. Enjoy the available enables the firm to expand its
activities and achieve the advantages of large-scale of operations. 

 

Question 02

 

Report
focus

·        
Financial accounting
focuses on providing information for the both internal parties and outsideriers
who need information about organization.  The purpose of the financial reporting is to
provide financial information about the reporting entity that is useful to
existing and potential investors, customers, employees, general public and
other creditors in making decisions about providing recourses to the entity.

Management accounting
analyses data to provide information as a basis of management actions and
focuses on how existing recourses of the organization can be optimized.

Legal
Background

 

·        
Financial statements
are complied in order to communicate information in the financial accounting.
Financial statements are prepared in compliance with the accounting standards
and to comply with the regulators requirements.

In the management
accounting also various management reports are presented to the management .MA
records are prepared to fulfil the requirement of internal parties such as
managers of the organization. For that, there are no accepted common standards
or structures.

Nature
of data

·        
Preparation of
financial statements is based only on historical transactions and events.

Historical information
as well as future forecast and estimates are based to prepare the management
accounting. Also they are presented analytically to make the decisions.

 

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