Private Limited Companies Advantages and Disadvantages

Financial Accounting Is the admonition to accomplish decisions accompanying to the organizations, it begins with the principles, concepts, and applications of banking accounting.

Financial Accounting follows a set of rules and legislation accepted as accounting concepts, accounting policies, and procedures like the article and prepayments.

Financial Accounting explains for us what are the banking statements, tells us what are the rules of legislation while they are accepting prepared, shows us how the banking accounts are prepared, helps us to accept how the assorted fields of business assignment together. It additionally keeps advance of company’s banking business like the banknote breeze and banknote inflow.

It provides stakeholders with official admonition like for Example: antithesis area account, accumulation and accident account, trading account.

Sole Trader: It is endemic by alone one person, that has no exact legislation and has one or added employees, their basic aim is to accomplish profit.

Sole Banker Advantages:

  • They can accomplish decisions calmly and quickly
  • Owner can ascendancy anything.
  • Less acknowledged formalities.
  • It is simple to set up

Sole Banker Disadvantages:

  1. Lack of capital.
  2. They accept to assignment and anticipate adamantine because For Example: If the buyer is sick, they will not be able to work.
  3. Unlimited liability.

Partnership: is amid 2 to 20 ally or shareholders that works calm and accessible to setup, the owners allotment with anniversary alternative the profits or losses of their business, and their basic aim is to accomplish profit.

Advantages of a Partnership:

  • It is accessible to bureaucracy by the accomplishment of partnership
  • More basic is available.
  • There are few cardboard to assignment on

Disadvantages of a Partnership:

  • Lack of goals to be achieved
  • Unlimited liability
  • Profits accept to be disconnected amid the partners

Private Bound Company: Is accepted as ( LTD), it charge accept one or added director, they do not charge a trading diploma, and it offers bound accountability to its shareholders but it places assertive banned on its ownership.

Advantages of Private Bound Company:

  • Limited liability.
  • More austere than the cachet of a sole trader.

Disadvantages of Private Bound Company:

  • The association tax has to be paid.
  • Cannot advertise shares to public.

Public Bound Company: Is accepted as ” PLC “, it’s a aggregation whose shares may be purchased by the accessible and whose allotment basic is not beneath than a accustomed minimum, and charge accept minimum 2 directors.

Advantages of a Accessible Bound Company:

  • greater borrowing power
  • the shareholders accept bound liability
  • shareholders can advertise their shares advisedly to public

Disadvantages of A Accessible Bound Company:

  • The claimed blow may be lost
  • Published accounts accept to be prepared
  • Difficult to ascendancy and manage
  • Too abounding acknowledged formalities

Clubs: It is the business that is affiliated from two or added bodies that has the aforementioned ambition that they appetite to achieve.

Their basic cold is to accommodate casework to the community

Charities: It is accepted as the charities that we apperceive for foundation like Dubai cares.

Their basic cold is to admonition alternative peoples or countries that are clumsy to pay for their needs and wants.

The Advantages of actuality a Charity

  • The Alms assignment can accommodate admonition and admonition to abetment a alms administration.
  • Charities are not accountable to pay Association Tax which is answerable on clubs, societies and autonomous organisations.

The Disadvantages of Actuality a Charity

  • Limited rules that are agitated on by charities.
  • Trustees are not about accustomed to annual financially from the charity.

Companies Act ( 1985 )

Is the act of the assembly of the UK, which will admonition the companies to annals and to set responsibilities of the companies, their secretaries and directors.

The act was the instance of alliance of abounding alternative pieces of aggregation legislation, and was one basic allotment of the rules administering companies, it was absolute by its own accessories of relationship.

The act is activated alone to companies that will anatomy into a acknowledged association beneath it, or beneath earlier company’s acts.

In the act bound accountability partnerships, sole traders, and partnerships were not absolute by it.

Companies Act (1989)

Is an act to alter the law apropos to the accounts of company, to accomplish new provisions, to alter the companies act 1985 with annual of admiral to get information, to actualize new accouterment with annual to the allotment of accuse in the aggregation and to adapt the law accompanying to companies, to adapt the fair trading act 1973, to acquiesce accouterment to be made.

Partnership Act (1890)

It’s the affiliation which exists amid bodies captivation on a business in accepted with the appearance of profit.

No absorption is to be answerable on drawings.

Profits and losses are aggregate appropriately amid partners.

The affiliation amid associates of any aggregation like:

  1. It is not a affiliation aural the acceptation of this act
  2. Registered as a aggregation beneath the companies act 1862

Rules for Determining Existence of Partnership

To actuate whether a affiliation does or does not exist, you should chase the rules:

  1. “Joint property, Joint tenancy, control in common, accepted property, or allotment buying does not of itself actualize a partnership, whether the owners do or do not allotment any profits fabricated by the use”
  2. “The administration of gross does not actualize a partnership, whether the bodies administration allotment accept or accept not a accepted appropriate or absorption in any property”

Accounting Concepts

Business Article Concepts:

  • It is a afar business and absolutely altered from the buyer at that business. It additionally can be activated to bound business like the charities.

The owner’s claimed spending is not recorded in the books at the business. The owners claimed transaction arise in the book is back the introductions basic or makes drawings.


  • It is a aphorism which applies to the abstracts that are not consistently included in accounting rule; it’s activated to sole traders, partnership, bound companies, clubs and charities.

Going Concern Concepts:

  • It is the annual that business will abide operating in the approaching except if there a able affirmation or if there a anemic evidence, the bulk is not taken from their ” break-up” bulk which is the bulk that they can advertise it in a apathetic way.

In final accounts of a business one of them prepares on the base that there is no intension to abutting bottomward the business.

Accruals (Matching) Concepts:

  • It is the assets that will be accustomed in some trading, absent accumulation and accident accounts. They should be accustomed out from time to time to be paid. It additionally allows some bodies to go adjoin alternative accounts if the amounts were so baby that will be misled, in accession words it’s back we accept use article in a aeon of time. E.g.: bill phone, gas bill, and baptize bill.

Prudence Concepts:

  • It states that the annual and the profits should not be accepted but additionally included in the accumulation and accident account.

This abstraction is accepted as conservation, If we activated this abstraction ensures that the annual present a activated pictures of the accompaniment of the business. This abstraction is activated for authoritative accoutrement for abridgement of debts and banal valuation.

Consistency Concepts:

  • It is a way that accounting adjustment uses it to there business, and the business has to accumulate on application it from time to another.

In some areas of accounting a best of adjustment is available, and back it will be chosen, again they should administer it consistently from years to years.

Money Measurement Concepts:

  • It shows the affairs that can be acclimated in budgetary agreement and in application barometer assemblage for banking reports.

The annual at a business alone annal the admonition which can be bidding in budgetary terms. The bulk of a acceptable administrator that contains loyal assignment force, aerial arrest morale, will accomplish abundant allowances to the business.

Historical Bulk Concepts:

  • It is the annual that asset the bulk and the antithesis area that is based to an aboriginal bulk back the aggregation crave it.

Duality (Double Entry) Concepts:

  • It is alone one annual that is abutting together.

For every transaction there is aspect in accounting that is fabricated on the basis. A giving and a accepting is accepted as Dual Abstraction of all transaction. This is accepted as bifold entry.

Principles of Relevance Concepts:

  • It is a actuality that is accepted to be aggregate from one point of appearance and accumulate it.


  • It is a bulk of person, measure, or object.

It is important that accumulation is alone recorded back it has absolutely been earned. Profits are not admired as actuality becoming back a chump places an adjustment for goods. Accumulation is admired as actuality becoming at the time of appurtenances or casework pars to the customers.


  • It is the affection of the things that is acclimated in business.

Information in banking statements in a business can be added useful. it is compared with agnate admonition about the aforementioned business for some alternative aeon of time or with alternative agnate admonition about alternative business.

Understand ability:

  • It’s how you accept the others and be able to allocution and acquaint to them.

Information should not be bare from the banking statements because it is believed it is too circuitous for users to accept banking statements charge be able of actuality accepted by the users of those statements.


They accept two types in UK and US

In US they accept a lot of rules but back they adapt for their annual they use the aphorism book and if it doesn’t awning the rules, the aphorism book is accustomed to be used.

In UK there is a accepted law activated to the accounting practice, but the alone aberration amid US and UK that in UK they accept an over benumbed requirements, the annual has to be appropriate it is alleged “true and fair views”


  • It is rules and procedures which are followed by all the alignment it additionally guides the alignment for the alertness of their accounts.

Rules and Procedures Which Administer To Banking Statements:

  • Financial annual shows alone the business that can be accustomed in a budgetary terms.


  • It is a aggregation that has the chargeless best in allotment the aggregation policies, procedures, and additionally it will affect on the abridgement of the money bulk that is acclimated in your accustomed time in life.

The alignment has two methods to accept from:

the beeline band depreciation

reducing balances

Each adjustment of them will aftereffect with a altered bulk of abrasion actuality answerable adjoin the profits.

Bad Debts:

The antithesis area reflects the bulk of the money that the organizations attributable it from sales, there is a lot of debtors that may not be able to pay the abounding amount. So

The organizations charge to acquiesce a allotment of bad depts.

The alignment can accept what allotment they appetite and back to address the bad debts to accomplish a provision, at the end it will affect the over all accumulation recorded.

Provision for Doubtful Debts:

  • It is a baby bulk that is set abreast for article actual big-ticket or article will appear after in the approaching (Debtors who may not pay their bills to the company) , they accepted accompaniment the allotment of the abundant barter debtors.

In approaching accounting, the accumulation periods would be askance if the article suffered a accomplished alternation of bad debts. So it seems alert to acquiesce for the adventitious that some debts may become bad.


  • It is an bulk due for a annual provided during a accurate accounting aeon but still not paid for at the end of it.

We should accommodate them in our accounting afore the year ends to appearance the “true and fair angle “the alignment charge to ensure that this accounts is acknowledging with accounting concepts.

The accession will be included in the bulk answerable to the accumulation and accident annual for the aeon as allotment of the bulk of the annual provided.


  • It is an bulk paid in banknote during an accounting aeon for a accouterment that will be provided in a after period.

Prepayments fabricated will be deducted from the bulk answerable to the accumulation and accident account.

Valuation of Stock:

  • It should be admired at the lower bulk and to be on the net bulk to beam with the bourgeois and attention concept.

It has three basic methods of annual stock:




Each will advance to altered bulk and will affect the accumulation level.

The Similarities and Differences of Sole Banker and Partnership

Sole Traders:

It is endemic by alone one person.

One has to accumulate accurate affirmation if he is self-employed.

If the business falters; his claimed assets are acceptable to be liquidated.

They don’t charge to bisect there profit.

It’s accessible to set up.


It’s endemic by two or added bodies together.

Profits are aggregate either appropriately or as per the agreement given.

If profits are to be shared, so are the liabilities too.

Partners can accumulation from bound accountability and aggregate tax advantages.

Application of Accounting Conventions and Regulations

We accept in accounting a abstraction alleged “true and fair appearance ” which admonition to ensure that accounting admonition is presented accurately and consistently.

The best frequently encountered assemblage is the “historical bulk convention”

This requires affairs to be recorded at the bulk cardinal at the time, and for assets to be admired at their aboriginal cost.

Under the “historical bulk convention”, therefore, no annual is taken of alteration prices in the economy.

And there are alternative conventions in accounting we can abridge as follows:

Monetary Measurement: Like workforce skill, morale, bazaar leadership, cast recognition, affection of management…And the accountants should not annual for items unless they can be quantified in budgetary terms.

An important convention.. The abstraction of “materiality” is an important affair for auditors of banking accounts.

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