Advantages and disadvantages of private limited companies

Fiscal Accounting Is the information to do determinations related to the organisations, it begins with the rules, constructs, and applications of fiscal accounting.

Fiscal Accounting follows a set of regulations and statute law known as accounting constructs, accounting policies, and processs like the entity and prepayments.

Fiscal Accounting explains for us what are the fiscal statements, tells us what are the regulations of statute law while they are acquiring prepared, shows us how the fiscal histories are prepared, helps us to understand how the assorted Fieldss of concern work together. It besides keeps paths of company ‘s fiscal concern like the hard currency flow and hard currency influx.

It provides stakeholders with official information like for Example: balance sheet history, net income and loss history, trading history.

a-?Sole Trader: It is owned by merely one individual, that has no exact statute law and has one or more employees, their chief purpose is to do net income.

Exclusive Trader Advantages:

They can do determinations easy and rapidly

Owner can command anything.

Less legal formalities.

It is simple to put up

Exclusive Trader Disadvantages:

1- Lack of capital.

2- They have to work and believe difficult because For Example: If the proprietor is ill, they will non be able to work.

3- Unlimited liability.

a-?Partnership: is between 2 to 20 spouses or stockholders that works together and easy to setup, the proprietors portion with each other the net incomes or losingss of their concern, and their chief purpose is to do net income.

Advantages of a Partnership:

It is easy to setup by the title of partnership

More capital is available.

There are few paper to work on

Disadvantages of a Partnership:

Lack of ends to be achieved

Unlimited liability

Net incomes have to be divided between the spouses

a-?Private Limited Company: Is known as ( LTD ) , it must hold one or more manager, they do non necessitate a trading sheepskin, and it offers limited liability to its stockholders but it places certain bounds on its ownership.

Advantages of Private Limited Company:

Limited liability.

More serious than the position of a exclusive bargainer.

Disadvantages of Private Limited Company:

The corporation revenue enhancement has to be paid.

Can non sell portions to public.

a-?Public Limited Company: Is known as “ PLC “ , it ‘s a company whose portions may be purchased by the populace and whose portion capital is non less than a statutory lower limit, and must hold minimal 2 managers.

Advantages of a Public Limited Company:

greater borrowing power

the stockholders have limited liability

stockholders can sell their portions freely to public

Disadvantages of A Public Limited Company:

The personal touch may be lost

Published histories have to be prepared

Difficult to command and pull off

Excessively many legal formalities

a-? Baseball clubs: It is the concern that is connected from two or more people that has the same end that they want to accomplish.

Their chief aim is to supply services to the community

a-? Charities: It is known as the charities that we know for foundation like Dubai attentions.

Their chief aim is to assist other peoples or states that are unable to pay for their demands and wants.

The Advantages of being a Charity

The Charity undertaking can supply advice and information to help a charity disposal.

Charities are non apt to pay Corporation Tax which is charged on nines, societies and voluntary administrations.

The Disadvantages of Bing a Charity

Limited regulations that are carried on by charities.

Trustees are non by and large allowed to profit financially from the charity.

Companies Act ( 1985 )

a-? Is the act of the Congress of the UK, which will assist the companies to register and to put duties of the companies, their secretaries and managers.

The act was the case of consolidation of many other pieces of company statute law, and was one constitutional portion of the regulations regulating companies, it was governed by its ain articles of relationship.

The act is applied merely to companies that will organize into a legal corporation under it, or under older company ‘s Acts of the Apostless.

In the act limited liability partnerships, exclusive bargainers, and partnerships were non governed by it.

Companies Act ( 1989 )

a-?Is an act to amend the jurisprudence associating to the histories of company, to do new commissariats, to amend the companies act 1985 with regard of powers to acquire information, to make new proviso with regard to the enrollment of charges in the company and to modify the jurisprudence related to companies, to paraphrase the just trading act 1973, to let proviso to be made.

Partnership Act ( 1890 )

a-?It ‘s the relation which exists between individuals keeping on a concern in common with the position of net income.

No involvement is to be charged on drawings.

Net incomes and losingss are shared every bit among spouses.

The relation between members of any company like:

1- It is non a partnership within the significance of this act

2- Registered as a company under the companies act 1862

Rules for Determining Existence of Partnership

To find whether a partnership does or does non be, you should follow the regulations:

1- “ Joint belongings, Joint occupancy, occupancy in common, common belongings, or portion ownership does non of itself create a partnership, whether the proprietors do or make non portion any net incomes made by the usage ”

2- “ The sharing of gross does non make a partnership, whether the individuals sharing returns have or have non a common right or involvement in any belongings ”

Accounting Concepts

Business Entity Concepts:

a-?It is a detached concern and wholly different from the proprietor at that concern. It besides can be applied to limited concern like the charities.

The proprietor ‘s personal disbursement is non recorded in the books at the concern. The proprietors personal dealing appear in the book is when the debuts capital or makes drawings.


a-?It is a regulation which applies to the stuffs that are non ever included in accounting regulation ; it ‘s applied to exclusive bargainers, partnership, limited companies, nines and charities.

Traveling Concern Concepts:

a-?It is the statement that concern will go on operating in the hereafter except if there a strong grounds or if there a weak grounds, the value is non taken from their “ break-up ” value which is the sum that they can sell it in a slow manner.

In concluding histories of a concern one of them prepares on the footing that there is no connotation to shut down the concern.

Accumulations ( Matching ) Concepts:

a-?It is the income that will be received in some trading, lost net income and loss histories. They should be given out from clip to clip to be paid. It besides allows some people to travel against other histories if the sums were so little that will be misled, in another words it ‘s when we have use something in a period of clip. E.g. : measure phone, gas measure, and H2O measure.

Prudence Concepts:

a-?It provinces that the stock list and the net incomes should non be expected but besides included in the net income and loss history.

This construct is known as preservation, If we applied this construct ensures that the history present a practical images of the province of the concern. This construct is applied for doing commissariats for decrease of debts and stock rating.

Consistency Concepts:

a-?It is a manner that accounting method uses it to there concern, and the concern has to maintain on utilizing it from clip to another.

In some countries of accounting a pick of method is available, and when it will be chosen, so they should use it systematically from old ages to old ages.

Money Measurement Concepts:

a-?It shows the minutess that can be used in pecuniary footings and in utilizing mensurating unit for fiscal studies.

The history at a concern merely records the information which can be expressed in pecuniary footings. The value of a good director that contains loyal work force, high stall morale, will do great benefits to the concern.

Historical Cost Concepts:

a-?It is the history that plus the monetary value and the balance sheet that is based to an original cost when the company necessitate it.

Duality ( Double Entry ) Concepts:

a-?It is merely one history that is joined together.

For every dealing there is aspect in accounting that is made on the footing. A giving and a receiving is known as Dual Concept of all dealing. This is known as dual entry.

Principles of Relevance Concepts:

a-?It is a fact that is known to be gathered from one point of position and maintain it.


a-?It is a grade of individual, step, or object.

It is of import that net income is merely recorded when it has really been earned. Net incomes are non regarded as being earned when a client places an order for goods. Net income is regarded as being earned at the clip of goods or services pars to the clients.


a-? It is the quality of the things that is used in concern.

Information in fiscal statements in a concern can be more utile. it is compared with similar information about the same concern for some other period of clip or with other similar information about other concern.

Understand ability:

a-? It ‘s how you understand the others and be able to speak and pass on to them.

Information should non be omitted from the fiscal statements because it is believed it is excessively complex for users to understand fiscal statements must be capable of being understood by the users of those statements.


They have two types in UK and US

In US they have a batch of regulations but when they prepare for their history they use the regulation book and if it does n’t cover the regulations, the regulation book is approved to be used.

In UK there is a general jurisprudence applied to the accounting pattern, but the lone difference between US and UK that in UK they have an over equitation demands, the history has to be required it is called “ true and just positions ”


a-?It is regulations and processs which are followed by all the organisation it besides guides the organisation for the readying of their histories.

Rules and Procedures Which Apply To Financial Statements:

a-?Financial statement shows merely the concern that can be given in a pecuniary footings.


a-?It is a company that has the free pick in taking the company policies, processs, and besides it will impact on the decrease of the money sum that is used in your normal clip in life.

The organisation has two methods to take from:

the consecutive line depreciation

cut downing balances

Each method of them will ensue with a different sum of depreciation being charged against the net incomes.

Bad Debts:

The balance sheet reflects the sum of the money that the organisations owing it from gross revenues, there is a batch of debitors that may non be able to pay the full sum. So

The organisations need to let a per centum of bad depts.

The organisation can take what per centum they want and when to compose the bad debts to do a proviso, at the terminal it will impact the over all net income recorded.

Provision for Doubtful Debts:

a-?It is a little sum that is set aside for something really expensive or something will go on subsequently in the hereafter ( Debtors who may non pay their measures to the company ) , they usual province the per centum of the great trade debitors.

In future accounting, the net income periods would be twisted if the entity suffered a whole series of bad debts. So it seems cautious to let for the opportunity that some debts may go bad.


a-?It is an sum due for a service provided during a peculiar accounting period but still non paid for at the terminal of it.

We should include them in our accounting before the twelvemonth ends to demo the “ true and just positions “ the organisation demand to guarantee that this histories is following with accounting constructs.

The add-on will be included in the sum charged to the net income and loss history for the period as portion of the cost of the service provided.


a-?It is an sum paid in hard currency during an accounting period for a proviso that will be provided in a ulterior period.

Prepayments made will be deducted from the sum charged to the net income and loss history.

Evaluation of Stock:

a-?It should be valued at the lower cost and to be on the net value to detect with the conservative and cautiousness construct.

It has three chief methods of valuing stock:

First in first out

Last in first out


Each will take to different value and will impact the net income degree.

The Similarities and Differences of Sole Trader and Partnership

Exclusive Traders:

It is owned by merely one individual.

One has to maintain careful grounds if he is freelance.

If the concern hesitations ; his personal assets are likely to be liquidated.

They do n’t necessitate to split at that place net income.

It ‘s easy to put up.


It ‘s owned by two or more people together.

Net incomes are shared either every bit or as per the footings given.

If net incomes are to be shared, so are the liabilities excessively.

Spouses can gain from limited liability and cod revenue enhancement advantages.

Application of Accounting Conventions and Regulations

We have in accounting a construct called “ true and just position “ which help to guarantee that accounting information is presented accurately and systematically.

The most normally encountered convention is the “ historical cost convention ”

This requires minutess to be recorded at the monetary value opinion at the clip, and for assets to be valued at their original cost.

Under the “ historical cost convention ” , hence, no history is taken of altering monetary values in the economic system.

And there are other conventions in accounting we can sum up as follows:

Monetary Measurement: Like work force accomplishment, morale, market leading, trade name acknowledgment, quality of managementaˆ¦And the comptrollers should non account for points unless they can be quantified in pecuniary footings.

An of import convention.. The construct of “ materiality ” is an of import issue for hearers of fiscal histories.


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