How to start a business
Peter, you used to be an engineer, therefore, you never contact with business in the past. Do not worry, I will Introduce some information about business In this e-mail. Of course, I will give you some advice. First of all, I will introduce several form of business organization. Do you know? There are two types of this which are sole proprietorship and partnership. 3. 0 Situational Analysis 3. 1 Form of Business Organization 3. 1. 1 Sole Proprietorship Sole proprietorship, Is a personal investment management, to all individuals and control, from individual to assume business risk and enjoy all the business income of he enterprise.
By way of individual proprietorship business owned enterprise has unlimited economic responsibility, bankruptcy when debit can withhold the owner’s personal property. For example, a hairdresser, a plumber, an accountant, a lawyer, a trainer etc. Of course, there are some advantages of sole proprietorship I want to you know. On the one hand, enterprise assets ownership, control, the management right, and the right of profit is highly unified. This Is helpful to conservative and enterprise management and the development of the secret, which is beneficial to the owner
Individual entrepreneurial spirit of the development. On the other hand,
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It can be part of the business partners and the other partners shall only investment and share in profits and losses, and can also by all partners together. Its characteristic Is the scale Is small, the capital requirement smaller. For example, professionals-lawyers, doctors, accountants etc. There are some advantages of partnership. Firstly. The partnership business Is easy to establish than the sole enterprise management risk and responsibility, the partnership business’ risk and partnership are lower than the sole proprietorship business.
Of course, there are also disadvantages of partnership which sometimes enterprise liabilities will beyond he original owner of enterprise investment, so they need to use their personal property debt to service. In addition, the partnership business is hard to get a lot of money from outside for their business. 3. 1. 3 Advice Peter, you retired as an engineer and never contact with business in the past. So, in my point of view, I think you should choose the form of business organization is partnership. Because partnership is the way of practice, they are between the partners Joint and several) Jointly undertaking liability risk.
Do you remember I told you last week? I also start my business with my friend recently, would you like to Join us and make a partnership? There are five characteristics of partnership. First of all, Life is limited that is the partnership is easier to establishment and dissolution. The Second characteristic is unlimited liability which is partnership organization as a whole to the obliged for unlimited liability. Besides that, it is mutual agency. The business activities of the partnership by the partners Jointly determine, partners have the right to carry out and supervise.
In addition, Partners enjoy the condominium in a partnership. Finally, the partnership in the production and business operation activities, has accumulated property shall belong to all the partners. Therefore, you can think about it, Peter. 4. 0 Accounting System 4. 1 What is Accounting Of course, in any form of organization should have accounting. Peter, do you know accounting? Accounting is a system that identifies records and communicates information that is relevant, reliable and comparable to help users make better decision.
Through accounting, you can know how much in and how much out in your business. Accounting, for each unit of economic activities complete, continuous, the yester of reflect and supervision, so as to strengthen economic management, improve the economic benefit, and at the same time, is all business, economic activities of the language, criterion and foundation. It is an important part of economic management. Accounting letting people and organization know if they are making a profit or a loss, what their business is worth, what a transaction was worth to them, how much cash they have and how wealthy they are.
It can be defined as an information system. Accounting information is enterprise or business the unit’s most important economic information, it continuous, systematic, comprehensive and integrated reflect and supervision enterprise management status, and for management, management decision to provide important basis. 4. 2 Benefits of an Accounting System As we know, the information of an accounting system is reflected investors decided to investment direction basis. Accounting system can assess the company’s funds trajectory, and predict cash flow direction.
Because whether investors, creditors, or shareholders, has the certain information, understanding has invested or plan to make reasonable decision. Accounting information system can improve the management of the company and help the supervision of financial department regulation. Accounting system can help the company to organize economic activity, and it is the basis of the upper management, evaluation company performance and development of business. Peter, then, I will give you flow chart of a simple accounting system that will be applicable to your business.
Flow chart of a simple accounting system: 5. 0 Conclusion In conclusion, there are two forms of business organization which are sole proprietorship and partnership suitable for Peter. Of course, in any form of organization should have accounting. In this report, it has shown that benefits of accounting system and flow chart of a simple accounting system. In my point of view, I think you should choose the form of business organization is partnership. Because the partnership business capital source than the sole proprietorship enterprise widely, it is relatively easy to establish.
So, I think partnership is more suitable for you. Questions: Yes, I do. I agree with this view which the income statement is a statement of financial performance while the balance sheet is a statement of financial position. 6. 0 Difference between Income Statement and Balance Sheet . 1 Income Statement Income statement is also called financial performance statement refers to the enterprise for a certain period time of accounting to reflect the operating results and the distribution of the accounting statements.
The operating results of the corporation which usually appears as a period time income and cost ratio of profit and loss. In order to reflect the enterprise’s profit and loss correctly, into the profit and loss statement must be in accordance with the revenue recognition principle is determine the incomes of the current period and according to the matching principle o determine the corresponding cost. The income statement provides information about business operating results.
Through the income statement, we can know the actual situation that the income of the business in a certain accounting period, we can know the cost of the business in a certain accounting period, and we can know the business production and management activities of the results. It is easy to accounting statements users Judgment business future development trend and make correct economic decision making. 6. 2 Balance Sheet Balance sheet is also called the financial position statement, said the business main accounting statements in a certain date financial situation which are assets, liabilities and owner’s equity situation.
The balance sheet provides information about financial position. Through the balance sheet, firstly, we can know a certain date total assets and its structure, thus, we can know business owns or how much money they control and its distribution. Secondly, we can know a certain date total liabilities and its structure, thus, we can know how much money own business need. The balance benefit for the accounting statements users to make correct economic decision making.