I be begins within two or more people who

I suggest partnership as the most suitable
ownership for their new business. Following differences between strengths and
weakness of partnership and limited company will be prove that partnership is
the best option for Mr. Fernando and Mr. Perera for their new business. A
partnership is commonly a business structure that formed by two or more people
who expect to form business together. Sometimes partnership can be begins
within two or more people who have a common business idea and skills that they
aim to make a successful business. In some situations partnership will be the
most logical option. Compare to other business structure it will be a good
choice of legal structure to carry on a small business with a low turnover.

The most important thing is partners can
share their profits, liabilities and decision making among their partners. In a
partnership partners will collect funds by their initial capital. They can
collect more money by more partners and it will help to the business growth and
the flexibility of the business. It also means more profits which will equally
share between partners. In a partnership partners can share their
responsibilities according to their skills. It will help to achieve successful
outcomes from the business. More partners means more ideas for solving problems
and can help each other when they need. Other important thing is this kind of
business can easily form, manage and maintain. There are less regulations than
companies and partners can continue their business under agreements of partners
without any interference by shareholders like limited company.

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Thus we can point out many strength exist
within partnership. Likewise strengths, there are some weaknesses that partners
can be face during their business activities. As partners it is necessary to
agree with things that are being done in such a situation and there are less
freedom to take decisions as an individual, otherwise it leads to disagreements
between partners and also each partner liable for actions by other partners.
Last one is unlimited liabilities which bare by partners (Example: Financial
risk).   

Limited company is a company whose liability
is limited. The main strength of the limited company is the financial security.
Shareholders are the only people who liable for debt. This reason will give a
comfortable condition to the investors in the company. When consider about the
weaknesses of limited company start-up cost is comparatively high than the
partnership. And also there are complex rules in accounts than partnership. In
limited companies’ shareholders can’t raise the capital by sale of shares.
Sometimes disputes will arise between director and shareholder as their ideas
of what is best for the company vary.  

When consider about the above mentioned
strengths and weakness of partnership and limited company it seems like it is
better to form the new business as partnership. Well formation according to the
procedures and rules of suggested business structure will give successful
outcome to those two partners without any doubt.        

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Question
no 2:

Differences between financial and
management accounting 

Differences of the management and financial
accounting can be divided under main 3 areas. Those are primary users (external
vs. internal users), purpose (generalizes vs. specialized information), and
focus (historical vs. future perspective).

1.     
Primary
users ( external vs. internal users)

Financial
accounting is meant for those external to the
organization, who need to get a view inside. These people are externals to the
organization,

·        
Investors

·        
Suppliers, customers

·        
Employees, unions

·        
Creditors

·        
Tax authorities, other regulators

Management
accounting is meant for those internal to the
organization, who need information to achieve organization goals. Management
accounting provide some other information to following peoples,

·        
CEO

·        
Department/ division managers

·        
General managers

 

2.      Purpose ( generalized vs.
specialized information)

Financial
accounting use the same three or four financial
statement to meet the need of a wide variety of users. Thus, the information is
generalized and aggregated and always follows a similar format. It is also,
normally, public information and removes some of the proprietary details and
specifics. Those financial statements are,

·        
Income statement

·        
Balance sheet

·        
Statement of cash flows

·        
Statement of retained earnings

Management
accounting reports are normally only produced to
meet the needs of a specific decision maker. Thus the reports are specialized
with a level of details to make a specific decision. Management accounting
reports are also normally private so nothing need to be concealed. 

 

 

 

3.      Focus (historical vs. future
perspective)

Financial
accounting is based on historical transactions. For
transactions to be recorded within a financial accounting system they must have
been based on past events. Financial accounting is primarily backward – looking
/ historical.

Management
accounting while still sometimes using historical
data, is meant to be used for decision making for the Future. Many management
accounting reports have future orientated data within them, for example within
budgets. Management accounting is far more forward looking than financial
accounting.