POA

• Trading business

  • Buys from suppliers and sells goods to customers
• Service business

  • Provides service to customers
• Ownership

  • owned by one owner who contributes capital to set up SP
  • Usually a small family run business
• Access and ability to raise funds

  • More unlikely to borrow funds from banks and other lenders due to the lack of personal assets that can serve as collaterals
  • funds usually come from owner
• Extent of liability and risk

  • When SP incurs debts and losses, the owner is obliged to pay them using personal assets.
• Level of control of business

  • Owner has absolute control of the business and usually runs the business by himself or herself
  • Owner may hire professionals to help him or her
• Lifespan of business

  • SP exists as long as the owner is alive and whishes to continue the operation
• Transferability of ownership

  • Owner can easily update the particulars of the new ownership to notify the cooperate regulatory authority of the transfer of ownership
• Formalities and procedures

  • The SP has minimal administrative duties to adhere to
• unlike a company that doesn't need to pay back dept when bankrupt, sole proprietor businesses need to pay back dept using anything under his or her name
• Role of accounting

  • Accounting is an information system that provides accounting information for stakeholders to make informed decisions regarding the management of resources and performance of businesses. *stakeholders are people that have investment in the business*
• Role of accountants

  • Accountants prepare and provide accounting information for decision-making by setting up the accounting information system (AIS)
  • Accountants become stewards of the business and are given responsibility to manage the resources. (*A steward does not own the business but work for the owner*)
  • Accountants think critically, solve problems, adapt and provide accounting and non-accounting information for decision-making.
  • Accountants provide timely, relevant, and credible information, based on accounting theories, which are easily and appropriately understood by stakeholders.
• Professional ethics

  • stakeholders place trust in the information provided by accountants, who must adhere to professional ethics, uphold integrity and objective'
• Integrity and objectivity

  • An accountant with integrity is straightforward and honest in all professional relationships
  • An accountant who is objective will not let biased, conflict of interest or the undue influence of others override his or her professional judgement .e.g. boss promises to give a higher bonus if accountant reports a higher profit or lower loss. Accountant should say no
• Stakeholders of accounting information are groups of people who will make use of information about the business to make decisions.
• Suppliers: whether to sell to the business on credit, depending on its ability to pay
• employees: Security of their jobs and whether to expect any bonuses
• lenders: Whether to grant loans to the business, and ability of business to repay the loan principal and interest
• owners and shareholders: whether to invest in the business or sell the business, depending on the risks and returns related to the business
• managers: Whether to consider ways to improve the performance of the business
• customers: Whether to buy from the business, depending on business ability to provide goods or services, as well as after-sales support service
• competitors: Compare their performance against the business and decide how to improve their performance
• • government: Whether the business complies with the tax regulations and decides the amount of tax to be collected from the business.
• Stakeholders rely on both accounting information and non-accounting information that are not shown on financial statements for decision-making
• Which goods to buy

  -cost of inventory

  -storage cost

  →types of storage

    →nature of product

    →consumer preference
• credit worthiness of customer

    - trade receivables balance

    - credit terms and cash discount

    - number of days trade receivables overdue

    - existing customers history of repayment

    →economic outlook

    →specific industry outlook

    →reputation of customer

    →customers history of repayment
• which supplier to buy from

  cost of inventory

  cost of terms

  cash discount

  cash of supplies

  cost of non-current assets

  delivery charges

  trade discount

  • cost of services

    →local or overseas supplier

    →after-sales service

    →return policy

    →online vs brick and mortar supplier

    →reputation of supplier

    →warranty
• 1. accounting entity is the activities of a business are separate from the actions of the owner. all transaction are recorded from the point of view of the business
• • accounting period is the life of a business is divided into regular intervals
• • going concern, a business is assumed to have an indefinite economic life unless there is credible information that it may close down
• • historical cost, transactions should be recorded at their original cost
• • monetary, only business transactions that can be measured in monetary terms are recorded
• • objectivity, accounting information recorded must be supported by reliable and verifiable evidence so that financial statements will be free from opinions and biases
• Formula:Assets = Liability + Capital + Income - Drawings - Expenses
• Assets + Drawings + Expenses = Liability + Capital + Income

  D.E.A.D = C.L.I.C
• 1. Assets→ Resources usually owned or controlled by the business to carry out its business activities.
• 2) Liabilities

  → Liabilities are amount owed by the business to other businesses. 
• 3) Equity→ Amount contributed to the business by the owners.
• A bank overdraft happens when you spend more money than you have in your bank account.
• Cost of sales

  • The cost of sales refers to the expenses directly related to producing or purchasing the goods or services that a company sells. It includes things like the cost of raw materials, labor, and manufacturing. It's like the ingredients and labor costs for a bakery to make and sell their cakes.