Partnerships and Corporations: The Accounting Process
Partnerships and Corporations – the accounting process
Dwight A. Holland II
ACC 206
Kristi Rayford 31 May 2010
How do partnerships and corporations differ in accounting processes? With partnerships, you have to look at several key concepts such as direct materials, direct labor, direct expenses, production overheads, process stock accounts. In reference to corporations, you have to consider a laundry list of items including accounts payable, accounts receivable, payroll, financial analysis, financial statements, balance sheet preparation and analysis, and profit and losses. Deciding which one to choose can be a difficult process, but the decision can be made with more ease based on the needs of your company and being well informed. The size, equity, staffing and financial scope of your business is a good place to start.
A partnership and its parameters are easy to get by. You need no special permission, license or permit to start a partnership. It is as easy as joining your money and assets and drawing up an agreement to work together. There are many benefits to a partnership that include limited life, mutual agency, unlimited liability, co-ownership of property, exclusion of partnership income tax. Limited life gives the flexibility of the partnership to dissolve if one partner decides to end the business relationship. Mutual agency suggests that either partner has the power to bind the company to a contract as long as it remains in the scope of the business. Unlimited liability states that if financial trouble arises, both partners must pay with their personal assets. Co-Ownership of property combines all assets which give more financial flexibility. No partnership income tax is just that…no business income tax. Only partnership income is taxed individually for each partner. Now on to the parameters of corporations.
Corporations are in many ways the complete opposite of partnerships in overview and characteristics. There are
Dwight A. Holland II
ACC 206
Kristi Rayford 31 May 2010
How do partnerships and corporations differ in accounting processes? With partnerships, you have to look at several key concepts such as direct materials, direct labor, direct expenses, production overheads, process stock accounts. In reference to corporations, you have to consider a laundry list of items including accounts payable, accounts receivable, payroll, financial analysis, financial statements, balance sheet preparation and analysis, and profit and losses. Deciding which one to choose can be a difficult process, but the decision can be made with more ease based on the needs of your company and being well informed. The size, equity, staffing and financial scope of your business is a good place to start.
A partnership and its parameters are easy to get by. You need no special permission, license or permit to start a partnership. It is as easy as joining your money and assets and drawing up an agreement to work together. There are many benefits to a partnership that include limited life, mutual agency, unlimited liability, co-ownership of property, exclusion of partnership income tax. Limited life gives the flexibility of the partnership to dissolve if one partner decides to end the business relationship. Mutual agency suggests that either partner has the power to bind the company to a contract as long as it remains in the scope of the business. Unlimited liability states that if financial trouble arises, both partners must pay with their personal assets. Co-Ownership of property combines all assets which give more financial flexibility. No partnership income tax is just that…no business income tax. Only partnership income is taxed individually for each partner. Now on to the parameters of corporations.
Corporations are in many ways the complete opposite of partnerships in overview and characteristics. There are
References: Horngren, C., and Harrison, W. (2007). Accounting; Custom edition. New Jersey; Pearson Education Inc. http://www.residual-rewards.com/business-partnerships.html retrieved 29 May 2010 at 2:14 p.m. http://www.e-law.bc.ca/art_corpstructure.html retrieved 30 May 2010 at 3:25 p.m.