Reference Chart
Ponchie McCollough
Tera Weets
Health Care Accounting
HCS/380
12 July 2019
Reference Chart
| Type of Business | Description | Key Users of Financial Information |
|---|---|---|
| Proprietorships | Proprietorships are businesses that are owned by one individual. The individual bears the sole responsibility for financing the business. Whenever there are good profits then they all belong to the business persons but losses can be punitive since they will bear them all on their own (Kuratko, 2016). Liability extends to the business owner. | Proprietorships liability extends to the users’ personal property and so is the tax obligations. The tax that is paid by an individual also applies to the sole proprietorship. The key users of the financial information can be categorized into two, internal and external users. Internal users could include the employees the owner of the business hired like the accountant, managers etc. for future planning purposes. External users can include creditors to ascertain the credit worthiness of the business, |
| Partnerships | Partnership is an agreement between 2 or more people to start and run a business. Each partner contributes in one way or the other either through capital, labor, skills or property. Resources are pulled together and thus easy on the parties involved. Profits and losses are shared as per the terms of agreement (Herrington, et al 2010). Liability extends to the partners. | The key users of the financial information are categorized into internal and external users. Internal users will use financial information to share revenue from the business, invest and also make financial decision for the business or in an event when the partnership is being dissolved. External users of the business information include the creditors like banks and lenders to determine the credit worthiness of the business, IRS (Internal Revenue Service) for tax revenue collection and FTC (Federal Trade Commission) for fair business practices assessment. |
| Corporations | A corporation is a legal entity that that is distinct from its owners and enjoys the benefits of a human being. For this reason, it can acquire a loan on its name, can sue or be sued, can enter into a contractual agreement with another party. Liability does not extend to the owners/shareholders. | The key users of the information can be classified as internal or external users. Internal users use the information to plan ahead, strategize and advice investors accordingly. External users of financial information include the shareholders for making investment decisions, creditor like banks to gauge credit worthiness of the corporation ( Drucker, 2014) and government and regulatory institutions. IRS (Internal Revenue Service) for tax revenue collection, FTC (Federal Trade Commission) for fair business practices assessment and SEC U.S. Securities and Exchange Commission meant to protect shareholders and allow companies to be publicly traded and access to information before an investor makes a financial decision. |
Reference
Drucker, P. (2014). Innovation and entrepreneurship. Routledge.
Herrington, M., Kew, J., Kew, P., & Monitor, G. E. (2010). Tracking entrepreneurship in South Africa: A GEM perspective(pp. 1-174). South Africa: Graduate School of Business, University of Cape Town.
Kuratko, D. F. (2016). Entrepreneurship: Theory, process, and practice. Cengage Learning.
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