Lecture Week 1
Topics to cover this week:
Forms of business organisation
The financial reporting environment
Accounting report users and their needs
The 3 main financial statements and their interrelationship
Forms of business organisation
1. Sole proprietorship (sole trader) - a business owned by a single person
Advantages:
simple to establish, cheap easy to setup
owner controlled
tax advantages
Disadvantages:
owner personally liable for business debts
financing may be difficult
transfer of ownership may be difficult
Sole trader structure good for small, low risk business.
Forms of business organisation
2. Partnership - a business owned by two or more people
Advantages:
simple to establish
shared control
tax advantages (partners pay personal tax on their share of profits)
broader skills and resources
Disadvantages:
partners personally liable
transfer of ownership may be difficult
partners may not agree on decisions
Partnership good for low risk businesses.
3. Company - a separate legal entity owned by shareholders
Advantages:
easy to transfer ownership (owners are called shareholders)
easier to raise capital
lower legal liability (shareholders not personally liable for debts of company)
Disadvantages:
unfavourable tax treatment – company itself pays tax.
lots of regulation
Company good for large, risky businesses.
Financial Reporting Environment
Corporations Act: compliance by all registered companies.
Australian Securities and Investments Commission (ASIC): monitors compliance of the Corporations Act and AASB standards.
Australian Accounting Standards Board (AAS ...