Dr. NICHOLAS WATSON

Business and its Environment       

Adopted from: https://courses.lumenlearning.com/sac-finaccounting/chapter/types-of-businesses-and-business-activities/

 

Accountants frequently refer to a business organization as an accounting entity or a business entity. A business entity is any business organization, such as a hardware store or grocery store, that exists as an economic unit. For accounting purposes, each business organization or entity has an existence separate from its owner(s), creditors, employees, customers, and other businesses. This separate existence of the business organization is known as the business entity concept. Thus, in the accounting records of the business entity, the activities of each business should be kept separate from the activities of other businesses and from the personal financial activities of the owner(s).  As you will see shortly, the business entity concept applies to the four main forms of businesses—single proprietorships, partnerships, and corporations. Thus, for accounting purposes, all four business forms are separate from other business entities and from their owner(s).

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• A single proprietorship is an unincorporated business owned by an individual and often managed by that same person. Single proprietors include physicians, lawyers, electricians, and other people in business for themselves. Many small service businesses and retail establishments are also single proprietorships. No legal formalities are necessary to organize such businesses, and usually business operations can begin with only a limited investment. The most attractive feature of a proprietorship is that there is no “double taxation”. Both proprietorships and partnerships do not pay taxes on profits at the business level. The only taxes paid are at the personal level—this occurs when proprietors and partners pay taxes on their share of their company’s income. On the other hand, a business owner is personally liable for all debts of his or her company. This is called unlimited liability. If you’re a sole proprietorship and the debts of your business exceed its assets, creditors can seize your personal assets to cover the proprietorship’s outstanding business debt.

 

• A partnership is an unincorporated business owned by two or more persons associated as partners. Often the same persons who own the business also manage the business. Many small retail establishments and professional practices, such as dentists, physicians, attorneys, and many CPA firms, are partnerships. Unlimited liability is even riskier in the case of a partnership. Each partner is personally liable not only for his or her own actions but also for the actions of all the partners. If, through mismanagement by one of your partners, the partnership is forced into bankruptcy, the creditors can go after you for all outstanding debts of the partnership.

 

• A corporation is a business incorporated under the laws of a state and owned by a few stockholders or thousands of stockholders. Almost all large businesses and many small businesses are incorporated.  The corporation is unique in that it is a separate legal business entity. The owners of the corporation are stockholders, or shareholders. Stockholders do not directly manage the corporation. They elect a board of directors to represent their interests.

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Accounting is necessary for all forms of business organizations, and each company must follow generally accepted accounting principles (GAAP). 

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TYPES OF ACTIVITIES PERFORMED BY BUSINESS ORGANIZATIONS

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The forms of business entities discussed in the previous section are classified according to the type of ownership of the business entity. Business entities can also be grouped by the type of business activities they perform—service companies, merchandising companies, and manufacturing companies. Any of these activities can be performed by companies using any of the three forms of business organizations.  CONTINUE READING THIS SECTION FROM THE LINK ABOVE.

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Classification of economic activity; primary; secondary; territory

Adopted from: http://www.bbc.co.uk/schools/gcsebitesize/business/aims/aimsandactivitiesrev3.shtml

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There are three main types of industry in which firms operate. These sectors form a chain of production which provides customers with finished goods or services.

• Primary production: this involves acquiring raw materials. For example, metals and coal have to be mined, oil drilled from the ground, rubber tapped from trees, foodstuffs farmed and fish trawled. This is sometimes known as extractive production.

• Secondary production: this is the manufacturing and assembly process. It involves converting raw materials into components, for example, making plastics from oil. It also involves assembling the product, eg building houses, bridges and roads.

• Tertiary production: this refers to the commercial services that support the production and distribution process, eg insurance, transport, advertising, warehousing and other services such as teaching and health care. CONTINUE READING PAGES 1-7 FROM LINK ABOVE.

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Private Sector

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Adopted from: http://www.privacysense.net/terms/private-sector/

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The Private Sector is usually comprised of organizations run by individuals and groups who seek to generate and return a profit back to its owners. 

Organizations in the private sector are usually free from government control or ownership, but sometimes choose to partner with a government body in a public-private partnership to jointly deliver a service or business venture to a community.

Popular examples of public-private partnerships, or P3s, in different countries include:

 

• The West Coast Infrastructure Exchange (WCX) in the United States

• Many health and education facilities in the United Kingdom

• Ontario’s Highway 407 in Canada

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Examples of the Private Sector

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Small, privately owned business form the greater part of the private sector. Despite this fact, this sector boasts a rich diversity of individuals, partnerships, and groups — from small mom and pop stores to multi-national conglomerates.

Examples of organizations in the private sector include:

• Sole Proprietors: Designers, Developers, Plumbers, Repairmen

• Partnerships: Dentistry, Legal, Accounting, Tax

• Small and Medium-sized Businesses: Retail, Hospitality, Food, Leisure, Legal Services

• Large Multinationals: Apple, Tesla, Disney, Procter & Gamble, PepsiCo

• Professional/Trade Associations: Canadian Institute of Management, American Management Association

• Trade Unions: British Columbia Teachers’ Federation, American Postal Workers Union

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Size of the Private Sector

The Gross Domestic Product (GDP) of a country represents the final value of all goods and services produced in a period of time.

In most developed countries, the private sector contributes a significant percentage towards its total GDP. The data (as of 2004) can be seen from the link above. READING PUBLIC SECTOR ON PAGE TWO FROM THE LINK ABOVE.

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The Role of Social Responsibility in Business Ethics

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Adopted from: https://www.universalclass.com/articles/business/the-role-of-social-responsibility-in-business-ethics.htm

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Business ethics take into consideration responsibilities not just inside the workplace, but also within the environmental, cultural, and social structures of communities. They also deal with accountability issues involved in scientific research, consumer protections, and the overall structure of any business or corporation. Corporate social responsibility has been divided into four types that must be considered simultaneously, including ethical, legal, economic and philanthropic responsibilities to consumers and society. CONTUNUE READING THIS SECTION FROM THE LINK ABOVE.

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The Roles of Mission, Vision, and Values

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Adopted from: http://open.lib.umn.edu/principlesmanagement/chapter/4-3-the-roles-of-mission-vision-and-values/

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Mission and vision both relate to an organization’s purpose and are typically communicated in some written form. Mission and vision are statements from the organization that answer questions about who we are, what do we value, and where we’re going. A study by the consulting firm Bain and Company reports that 90% of the 500 firms surveyed issue some form of mission and vision statements (Bart & Baetz, 1998). Moreover, firms with clearly communicated, widely understood, and collectively shared mission and vision have been shown to perform better than those without them, with the caveat that they related to effectiveness only when strategy and goals and objectives were aligned with them as well (Bart, et. al., 2001).

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A mission statement communicates the organization’s reason for being, and how it aims to serve its key stakeholders. Customers, employees, and investors are the stakeholders most often emphasized, but other stakeholders like government or communities (i.e., in the form of social or environmental impact) can also be discussed. Mission statements are often longer than vision statements. Sometimes mission statements also include a summation of the firm’s values. Values are the beliefs of an individual or group, and in this case the organization, in which they are emotionally invested. The Starbucks mission statement describes six guiding principles that, as you can see, also communicate the organization’s values:  CONTINUE READING THIS SECTION FROM THE LINK ABOVE.

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