FORMS OF BUSINESS ORGANIZATION

FORMS OF BUSINESS ORGANIZATION

Single or sole proprietorship:

The simplest form of business organization "to organize and operate" is a single or sole proprietorship. This is the most common form of ownership and is found in business such as small retail aborts, service stations etc. The owner is the only one in control and makes all management decisions.

Partnership:

In a partnership, ownership is divided between two or more persons who agree to share their] property and skills to start and operate a business: Like the single proprietorship, 9 partnership business is]

simple to organise.

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(c) Joint Stock Company:

A joint stock company is* formed under the Companies Ordinance, 1984 and has the legal right tol act as a person. It may be owned by many people. A company has its own name, in which it can buy, own,] and sell property; make contracts; borrow money; and take court action. The persons who have made] investment in the company are known as shareholders.

2. GOODS OR MARCHANDISE

In accounting the word "Goods" has a special meaning. It refers to something which has beer purchased by a trader for resale purposes or anything which has been manufactured for selling purposes.] For example, if a trader purchases furniture for use in the business, it will not be regarded as "goods", but il it is purchased for resale, it will be regarded as "goods". The same article may be "gooaV-for one trader but may not be so to another trader. For -example, turnitiue is not' "goods" for a book seller; but it will regarded as "goods" to a furniture -dealer.

Thus, ctah will be "goods" to a cloth dealer

Watches will be "goods" to a Watch dealer

Books will be "goods" to a Book - Seller

Stationery will be "goods" to a Stationery dealer. But watches, books or stationery will not be considered as "goods" to a cloth dealer.

3. PURCHASES:

In accounting language the word "Purchases" has a special meaning. When saleable goods 'bought in a business, it is said that "purchases" have been made. For example, to a cloth dealer, whenevc cloth Is purchased, il will not be necessary to mention that cloth has been purchased ( simply it wilt be saic mat purchases have been matte. On the other hand, if stationery is purchased, then it will be essential mention mat stationery has been purchased.

4. CASH PURCHASES:

If goods are purchased from a supplier and payment is made to him at the same time, sucl

purchases are known as "Cash Purchases". For example, Mr. X purchased goods from a seller, Mr. Y, to

Rs. 5000 on 1st January, 2005, and payment is made to the seller (Mr. Y) at the same date (1.1.2005), it wil(

be a case of cash purchases. ,

5. CREDIT PURCHASES OR "PURCHASES ON ACCOUNT:

When goods are purchased from a seller and payment is not made to him at the same time, rathe the payment is arranged to be made at some future date, such purchases are known as "credit purchases" "Purchases on account". For example, Mr. A purchased goods from Mr. B for Rs. 5000 on 1st January^ 2005 and Mr. A agreed to make the payment of goods on 15th January, 2005 (payment has not been on 1.1.2005), it wilt be a case of credit purchases. On 15th January Mr. A will pay Rs. 5000 to Mr. B.

6. PURCHASES RETURNS OR RETURNS OUTWARDS:

Goods once purchased may subsequently be sent back to the seller for certain reasons, i.e. gc are defective, not according to specification, damaged or below standard. Such return of goods to the sell.