1.2.2 Partnership

Partnership-is a two or more people, who combine their resources and skills to achieve common goal. The Uniform Partnership Act defines partnership as “an association of two or more persons to carry on as co-owners of business for a profit”. Ownership and profit are shared relatively with each partner’s contribution, and each partner has equal rights to partnership assets, but only for business purposes.

Benefits

First, all profit belongs to partners, and there are no shareholders, with which partners distribute dividends.

Second, two people is more than one, it means partnership has more resources and sufficient number of co-owners, if one owner is sick or disabled, and key advantage is sharing of risks.

Finally, any partnership profit or losses affects directly to partners personal income for government tax. It means that losses can be used by partners to reduce their individual government taxations. It is important to partners who have significant earnings from other sources.

Disadvantages

First, the death of partner may end the partnership with serious consequences to all concerned. But these consequences can be avoided, if an ownership transfer plan (buy-sell agreement) is implemented and funded.

Unlimited personal liability-as sole proprietor each partners are also liable for all company’s debts. If company financially collapsed, business debts can eat up not only all of the partnership assets, but all personal estates of all partners.

2.0 Users of accounting information

Who are the users of accounting information and why they need such information? The first user of accounting information is a management of an organisation whose accounting information needs are so specialised and evolved into own separate accounting type called “Management Accounting”. But there are other group of users who have reasonable right to obtain information about an organisation, including investors, employees, suppliers, government agencies and public.

Following describes users of accounting information and their needs:

Management

Everyone will agree that the first group of users who need information about an organisation is a people who use to make decisions and run a business day-to-day and this group is referred to a broad term called management. Because these users have close involvement to a business, they are able to overview a large volume of information therefore they need accounting to choose the most relevant information to their business decisions and judgements. The management group is so broad and there is a wide range of information available to management that is why they need accounting system information to serve particular needs of managers.

Owners or investors

Investors don’t have any problems in gaining access to accounting information of a company and they are able to select appropriate needed information. However, investors are separated from the management of a business entity, because of a limited liability company. Information for such users is designed in another way, because investors are only interested in their invested money. Business owners are viewed as investors, who entrust their money to an organisation and they are waiting for returning of investments as dividends or increasing in value as company grows. Investing money to fund a business is a risky action therefore investors require information to help them what to decide-buy, sell or hold.

Employees

Employees are interested in operating and profitability of their company or organisation. They are also interested in information about employer’s ability to provide retirement, remuneration and employee opportunities. Providing such information is very important to them, because he or she will be employee and they want to know about their future stability, employer’s ability to meet agreements, working conditions, future perspectives, location, pay conditions, security among workers. Much of this information is a quite specialized and detailed, it will be better to understand if company supplies this information in the form of social purpose reports. Employees also can look to financial statement to ensure that previously provided report is correct.

Suppliers

Suppliers need information which makes able to know whether to sell or not to particular company and identify which amount of money or other asset to lend them. They need accounting information to ensure that there is no risk to supply them, because they have very little protection. If business fails, organisation assets may be insufficient to cover their liabilities to suppliers. But information also easily can be obtained through reading journals and local press.

Government agencies

Government interested in information about allocation of resources and also about company activities. Government agencies need information in order to assess taxation, provide sources for economic statistics and national income. Other government agencies such as utility companies require accounting information as a part of package by which they check prices which charged by this company to consumers to their products and services.