Starting talents, Knowledge, more ideas, etc. ·

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Starting a Business is one of a major step in life for
anyone. Business can be refers to a transaction activity that happens with
producing goods and services. Sometimes it gains profits and also it will not. This
activity of Business is categorized in to more sides as Sole Proprietorship,
Partnership, Limited Company and Corporative. According to this situation Fernando
and Perera were going to start a restaurant business in Colombo.  A Restaurant is a business that comes up with
a combination of goods and services. So they some risk of their business,
because the profits are depends on the customers trust and favorability. On this
time they seeking for a better type of business ownership to be establish.


Partnership business
is a relationship between two or more parties with the purpose of having
profits with less legal risk.


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Easy to setup the business with few formalities.

Business risk can be reduced and it distributed among
partners in the business. In case of losses, each partners will share the liability.

More resources are available for the business
such as capitals, talents, Knowledge, more ideas, etc.

Easy to Make changers and take decisions in the
business environment.

No special Taxes


Lack of continuity, death, insolvency, incapacity
other retirement of any partner, the partnership will be dissolved.

Conflict between partners.

Unlimited liabilities, the have to use their
personal capitals to cover the business debts.

Profits will shared among partners




Limited Company
is a type of a business that manage by shareholders and conducted by the Board
of management. This business have limited liabilities, because the owners are
legally responsible only to the extent of the amount of capital they have
invested for its debts.



Limited liabilities, owners will only
responsible for what they have invested for the company as capital.

More capital for the business.

Partner’s share can be sold to their family.

Company may have expanded or unlimited lifespan.

Limited company is legally separate from their



More expensive to set up than partnership.

There are more difficult and restrictive rules
governing the accounts and bookkeeping of company.

Money withdrawal from company can be difficult.

A professional accounting and accountant must be


to my opinion I suggested them to start this Restaurant business as a Partnership
business, because both of them can start this business in a little investment.
This restaurant business is have some risk because they go into start this
business in Colombo, so they have to face more competitors. So their major target
will be to gather customers for their business. After they gather customers
they can expand their business. If they failed to familiar with the customers
with their business in a partnership business situation they can easily shutdown
the business and they can shit for another business idea.





Question 2                                                                                                                                                      

Discuss THREE main distinctions/ differences between Financial
Accounting and Management Accounting.

Financial Accounting

Financial accounting is an accounting system
that mainly focuses on the preparation of the financial statement of a company
to provide the financial information to the interested parties.

Management Accounting

Management accounting is an accounting system
with provides relevant information to the managers to take policies, plans and strategies
for growing of a business effectively.



According to
those two types of accounting strategies the financial accounting is mainly
done for between a specific period as a example between two years, but on other
hand management accounting mainly done as per the needs of the board of management
such as quarterly, half yearly etc.

Financial Accounting is compulsory for the
company because it produces the summary to external parties to get idea about
the company performances. Those summaries are about the past periods performances,
the external parties understand how this company performed in past days. According
to the management accounting, it is optional requirement for the organization,
because this will mainly done on future forecasting to the managers and directors
to take the future decisions for the company growth

Categories: Accounting


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