Accounting Journal Entries A/P A/R Cash Liabilities Essay

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Accounting

Journal Entries

A/P

A/R

Cash

Liabilities

AP

AR

Cash

Liabilities

Cash

Cash

Liabilities

Reserve

Theory

Alan Moser and Stephanie Philips operate a successful software business in Brisbane. Alan and Stephanie are existing clients of your accounting firm CPT Accountants. Their business currently operates as a partnership but due to expansion plans they are considering incorporating the business (ie becoming a company). They wish to clarify the following points before making a decision and have asked CPT accountants to write a report answering the following:

What is the difference between forming a proprietary (private) company and public company?

There is substantial difference in the reporting requirements and tax basis for private and public companies. However, the biggest difference is how the legal entities deal with liability. Under a sole proprietorship and a partnership the owner can be held liable for many different problems that the business incurs while under a public model the company's owners have a limited liability. This offers the investors in a public company a line of protection from being personally liable for any of the businesses activities. For example, if someone tripped and fell due to some kind of negligence and sued the company, then under the private model the owners personal assets could be subject to compensation but in the private model the company's owners would be protected from the legal action.

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Therefore the public company model can help protect personal assets which are one of the major advantages to this form of ownership.

Another difference is that ownership is generally easier to transfer in a public company vs. A private one. Generally in public companies there will be some share that can be bought and sold that represents owners' equity and larger companies can be traded on a market. However, even the smaller public companies must issue shares even if they are not traded on a public market. This also makes it easier to buy and sell them as opposed to a private or proprietary company. Proprietary companies will have to establish a value for the business based on the financial statements and goodwill where as a market can establish share prices quicker and easier for ownership.

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Latest APA Format (6th edition)

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"Accounting Journal Entries A P A R Cash Liabilities" (2014, September 03) Retrieved May 21, 2024, from
https://www.aceyourpaper.com/essays/accounting-journal-entries-p-r-cash-liabilities-191523

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"Accounting Journal Entries A P A R Cash Liabilities" 03 September 2014. Web.21 May. 2024. <
https://www.aceyourpaper.com/essays/accounting-journal-entries-p-r-cash-liabilities-191523>

Latest Chicago Format (16th edition)

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"Accounting Journal Entries A P A R Cash Liabilities", 03 September 2014, Accessed.21 May. 2024,
https://www.aceyourpaper.com/essays/accounting-journal-entries-p-r-cash-liabilities-191523
   

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