Essay about Accounts Receivable and Business

Submitted By Ardragon

Words: 372

Pages: 2

(a) What form of business organization—proprietorship or corporation— do you recommend that Natalie use for her business? Discuss the benefits and weaknesses of each form and give the reasons for your choice. Ignore taxes.
A corporation is a separate legal entity and has the benefit of being able to divide its ownership with shares and these stakeholders enjoy limited liability, unlimited life and can transfer their ownership anytime to other investors. However these shares can decrease or increase depending on how well the company is running but these stakeholders are not able to make any decisions for the company.

A proprietorship has the benefit of only needing a small amount of capital to start its business. However although he/she receives any profits or losses from the business the owner is fully liable for all debts concurred by the business. I recommend that Natalie uses a proprietorship for her business organization as opposed to a corporation because her business is small and she manages and works by her own and therefore her business would be better suited for a proprietorship rather than the large scale dynamics of a corporation.

(b) Identify specific asset, liability, and equity accounts that Cookie Creations will likely use to record its business transactions.

Assets: baking equipment, transport vehicle, food/stock supplies, cash

Liability: bank loan, accounts payable, bank loan payable

Equity: accounts receivable

(c) Should Natalie

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