Pros and Cons of Partnership as a Form of Ownership

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Q.1 Identify the pros and cons of the partnership as a form of ownership?

A partnership is formed when two or more people engage in a business activity and share investment, profit and loss. Just like any other form of ownership, it has its advantages and disadvantages. Following we discuss some of the pros and cons of a partnership.

Pros of the Partnership

(1) Ease of Formation: Partnership is comparatively simple to form. All you need to form a partnership is an agreement. A verbal agreement is enough to start a partnership however it is much recommended that partnership be formed based on a written legal partnership agreement.

(2) Funding: Partnerships generally have a low startup cost. With two or more people
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Angel Investors are individuals who have a lot of money and are looking to invest a large amount into a profitable business for financial gain and profits.

(4) Venture Capital: The companies who fund promising and high potential companies in exchange for ownership shares are known as venture capital firms. Venture capital is the money provided by venture capital firms to startup businesses that are perceived to have a long term growth potential. It has a high risk for investor but also has potential for above average profit returns.

3. Determine and discuss how managerial accounting can help managers with product costing, incremental analysis and budgeting?

Managerial accounting provides accounting information needed by managers inside an organization to run its day to day operations. It provides managers with financial information’s needed to make sound business decisions. Managerial accounting information includes budgeting, product costing, performance reports, variance analysis and financial ratios.

Following we look at three managerial duties that rely on information received from managerial accounting:

(1) Product Costing: Product costing is the process of accurately determine the cost of a single product, by analyzing all the expenses that accrued from the beginning (raw material) to the end (sale). In traditional costing method indirect costs are applied to products, based on an overhead rate that is predetermined. The

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