Business is an organization involves in trading activities of goods or services or both. Business can be a profit organization or a non profit organization. There are three types of profit organization in business. First type is Merchandising Business which involves purchasing and selling the products that they purchase. They do not manufacture the products. Example of this business is Parson, who purchase clothing, toys and other products from various manufacturers and then sell in their department store. The second type of business is
Manufacturing Business. This organization manufacture and sell it own product. Example of this business is Intel who manufactures processors and motherboards for computers. The third type of business if Service Business. This organization provides services instead of product. Example of service business is AI insurance which provide insurance services to the customer. Organization is a group of people working together in a business. There are three common forms of business organization. First is Sole proprietorship which is also known as sole traders.
Sole proprietorship is a business owned by a single owner, all the profit of the business will be owned by the owner himself and the owner also is responsible for all the losses incurred by the business. This a simplest form of business entity and is easily setting up and have lower cost. The disadvantage of this organization is that the financial resources are limited. Example of sole proprietorship is the grocery stores nearby our house. Question 1 (b) count. The second type of organization is partnership which can be consists of two r more business partners.
In order to form a partnership, a verbal or written agreement on profit and loss distribution, duties and compensation or benefits of the partners need to be form. Example of partnership will be legal firms or audit firms which are forms by more than one lawyer or audit. The third type of organization is companies which also know as corporation. A company is a business entity legally separated from its owner. There are three types of companies in the Companies Act 1965. One of it is company which is limited by hare, where the personal liability is according to the number of share they are holding.
The other types of company are limited by guarantee, the members of company agrees too certain amount of liability if the company suffer losses. An unlimited company is a company with no limit of the member’s liability. Example of an organization will be Patrons which is a company limited by shares. Question 1 (c) Product or services in marketing is something that fulfils a person’s needs while in retail it is merchandise because it is being purchase and sell, and in manufacturing it is bought as raw material and when manufactured done to be sold a finished goods.
Example of product or services in marketing is insurance which a driver need in case of accidents, while car is needed for transportation. Examples of goods in retails are the daily products like toothbrushes, clothes that we bought from a department store. Example of goods in manufacturing are the spare parts needed for assembling cars which is bought by a car manufacturer from a spare parts manufacture. Question 1 (d) Transaction is economic business activities which involve trading of goods or arrives with money or credit.
Example is the payment or collection of cash, a purchase made by credit or cash and contribution or withdrawer made by the owner. In order to prepare a financial statement, an accountant need to record, analyses, classify and summaries business transaction. Financial statement differentiates assets to liability and owner’s equity. The assets should always equal to the liability and the owner’s equity. The statement of financial position is only valid for that day it was made only.