A business is an
organization where goods and services are exchanged over money from one person
to another. A business can be categorized based on the size of the
organization, legal liability, ownership of the organization etc. businesses
can be categorized into 5 types such as,
Before selecting a proper
business ownership, Mr. Fernando & Mr. Perera must have a clear idea about
the strengths and weaknesses of each business type.
As per their agreement,
the partners must share profits and losses during their partnership period.
There two main types of agreements in a partnership agreement as written or non
written. Also partnership can be form as mergers and acquisitions corporate alliance.
ü More investment compared to a sole proprietorship
ü Decision making process can be done effectively
ü Flexibility of the business is higher than limited
ü Share responsibility among partners/ owners.
ü Relatively easy to establish
ü Ability to raise funds
ü Disagreement between partners/ owners
ü Profit must be shared.
ü Lack of continuity.
ü Unlimited Liability.
A limited company is an
organization which is operated by a board of directors.
ü Investments are higher compared to other business
ü Status give value to the business
ü Banks prefer to deal with limited company businesses.
ü Taxation and tax advantages
ü Creditability and trust
ü Investment and lending opportunities
ü Limited liability
ü High rules and regulations
ü Delegation of power
ü More paper work
ü Less privacy
details and account details of the directors will be public therefore it can be
accessed by anyone.
choosing the best option there number of things to consider. What sort of work
will be undertaking, what sort of clients to be looking to engage with.
recommend Partnership business ownership. Because,
It is quite easy to start up a partnership rather
than a limited company type business. If Mr. Fernando & Mr. Perera are
starting a limited company, they should invest more money and two people cannot
run a limited company.
company type of business legal responsibilities are much higher compared to
partnership. Too much paper work. Legal
to wind up
Since the Colombo is the main city of business, we
cannot guarantee that Mr. Fernando & Mr. Perera face will face a profit or
loss in the future. Therefore unfortunately if they face a loss, they can wind
up their partnership compared to a limited company.
venturing in to a partnership, there few things to consider.
Come to an
agreement on the restaurant’s goals.
written partnership agreement
Make sure to
outline each partner’s role.
meetings with your partner
By following these steps,
the restaurant will receive a high level of profits which will eventually lead
Mr. Fernando & Mr. Perera to open more restaurants in the future and gain
profits more than losses.
Accounting is recording
and providing financial information to the internal and external parties of the
organization to make future decisions. There are two principles of accounting
Both above principles
are providing qualitative and quantitative information to the managers. There
are several differences between financial accounting and management accounting.
These differences can be identified as,
of the information
of presenting statements
accounting is the process of recording, summarizing and reporting all the
transactions resulting from business operations over a period of time to stake
analysts and other outsiders of the company.
accounts are legally compulsory to prepare.
accounts are prepared to report past financial records.
users of financial statements are called the “stakeholders”. Stakeholders are
the ones who are interested towards the organization.
is used by managers to make decisions concerning the day-to-day operations of a
business. It is not based past performance but on current and future trends.
accounts are not legally compulsory to prepare.
Accounts are prepared to report future records.
users of the management accounts are internal parties.