The finance role operates in a variety of different forms of businesses. Organizations comprise into three different types of entities. The three primary interests are the sole proprietorship, the partnership, and the corporation. The sole proprietorship form of organization embodies a single individual ownership and offers the advantages of minimalism of decision-making, low organizational and operating costs. Most small businesses with less than ten employees are sole proprietorships. The major drawback of the sole proprietorship is that there is unlimited liability to the owner (Block-Hirt, 2004). In dissolution of the entity's debts, the owner loses not only the capital investment of the business, but possible may lose personal assets. The profits or losses of a sole proprietorship are taxable as though they belong to the individual owner (Block-Hirt, 2004). Therefore, if a sole proprietorship makes $25,000, the owner/proprietor will claim all profits on an individual tax return. Approximately 75 percent of the 21 million business firms in this country are operating as sole proprietorships, and these produce approximately six percent of the total revenue and 27 percent of the total profits of the U.S. economy (Block-Hirt, 2004).
Financial statements provide information about the financial position, performance and changes in financial position of the organization that is useful to a wide range of users in making trade and industry decisions. Financial statements also show the results of the accountability of management for the assets delegated to it. Those consumers who wish to evaluate the accountability of management do so in order that they may make economic decisions; these assessments may include, for example, whether to hold or sell their investment in the venture or whether to reappoint or replace the management.
Financial statements are useful to different users in different ways:
(a) Investors. The providers of risk... [continues]
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