chapter 5. equities and transactions
TRANSCRIPT
Chapter 5.Equities and transactions
Instructor: Ng T Thuc Hien
Contents
1.Types of business
2.What is equity
3.Equity: share capital
4.Equity: retained earnings and other reserves
5.Dividends
1.Types of business
Types of business
Sole traders Partnerships Limited liability companies
01 02 03
Watch the following videos about sole traders,
partnerships and limited liability company and note
down the characteristics of each type of business. After
the videos, groups will join a game to test your
understanding.
Each group nominates 2 climbers to climb the Olympia
peak. Group which has climber in Top 6 will get 10
points/climber.
Team workTypes of business
https://nearpod.com/student/
Summary
- Sole traders are people who work for themselves. Examples include a
local shopkeeper, plumber or hairdresser. The term sole trader refers to
the ownership of the business; sole traders can have employees.
- Partnerships occur when two or more people decide to share the risks
and rewards of a business together. Examples include an accountancy,
medical or legal practice. A partnership can take one of two forms: a
general partnership (like two or more sole traders) or a Limited Liability
Partnership LLP (more like a company and not considered further in
Accounting).
- Limited liability companies are incorporated to take advantage of
‘limited liability’ for their owners (shareholders). This means that, while
sole traders (always) and partners (usually) are personally responsible for
the amounts owed by their businesses, the owners (shareholders) of a
limited liability company are only responsible for the amount to be paid for
their shares.
Source: ICAEW CFAB Accounting workbook
Summary
- Sole traders:
• Owner contribute 100% of the capital.
• Easy to establish.
• Limited lifetime -> The business is dissolved if the
owner is ceased or dead.
• Profit from the business is taxed on personal income
tax.
• Owner is personally liable for the business’s liabilities.
• Accounting is maintained based on personal
preferences of owner.
Summary
- Partnerships:
• Have to file with authority to establish.
• Two or more partners contribute capital.
• Partners are jointly and severally liable for the
business’s liabilities.
• Profit from the business is taxed on personal income
tax of partners.
• Accounting must be filed according to state
requirements.
Summary
- Limited liability companies/Corporations:
• Have to file with authorities to establish.
• Owners are not personally liable for the company’s
liabilities.
• Accounting must be filed according to state
requirements.
• Under government of Corporate Law.
1. Sole trader: kinh doanh cá thể2. Partnerships: kinh doanh hợp vốn3. Limited liability company: Cty TNHH4. Corporation: tập đoàn5. Private company: công ty tư nhân6. Public company: công ty đại chúng7. Separate legal entity: tư cách pháp lý độc lập8. Ownership: quyền sở hữu
02. What is equity?
ASSETS = LIABILITIES + EQUITIES
Equity
represents the
net funds
invested into a
business.
Capital contribution
any time that you
pay for business
expenses with
personal funds or
transfer personal
funds to a business
bank account.
Entity type Sole trader Partnership Corporation
Capital Owners’
equity
Partners’
contributions
Shareholders’
equity
Retained earnings
the amount of net
income left over for
the business after it
has paid out
dividends to its
shareholders.
Entity type Sole trader Partnership Corporation
Capital Owners’
equity
Partners’
contributions
Shareholders’
equity
Retained
earnings
Retained
earnings
Retained
earnings
Retained
earnings
Owners’ withdrawal
owner’s withdrawal is
when an owner
takes money out of
the company for
personal use.
Entity type Sole trader Partnership Corporation
Capital Owners’
equity
Partners’
contributions
Shareholders’
equity
Retained
earnings
Retained
earnings
Retained
earnings
Retained
earnings
Withdrawals Drawings Partner
drawings
Dividends
1. Capital contribution/capital: vốn góp
2. Owners’ equity: Vốn chủ sở hữu
3. Partners’ contribution: Vốn góp thành
viên
4. Shareholders’ equity: Vốn cổ đông
5. Retained earning: Lợi nhuận giữ lại
6. Withdraws/Drawings: Rút tiền
7. Dividend: cổ tức
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