Compare the differences between a Sole Trader, a Partnership and a Limited Company when preparing final accounts

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Unit 12 Financial Accounting

Simon Taggart

Introduction

In the following essay, I will compare the differences between a Sole Trader, a Partnership and a Limited Company when preparing final accounts also included in the essay will be the concepts and conventions used when preparing final accounts. I shall also outline the regulatory standards within the Accounting Profession. I shall start by giving an explanation of how the accounting system functions.

How does the accounting system work?

Business keep financial records for a number of practical reasons, which are:

> To quantify such items as sales, expenses and profits

> To present these figures in a meaningful way so the business can judge its success over the past year

Below is a diagram of the Accounting System: (all things below will be explained later in the assignment)

Diagram taken from Business Accounting Second Edition by David Cox.

Prime Documents

Business transactions generate documents, these documents go into the primary accounting records and from these records are placed throughout the accounting system. The following are prime documents:

> Invoice - when a business purchases goods the company or individual