The paper "R Riggs and J & B Associates Financial Performance" is a great example of a finance and accounting assignment. R Riggs is operating as a sole proprietorship business type. A sole proprietorship is a kind of business that is owned by a single person. This single person is entitled to the entire net profit from business and is also solely responsible for the debts. The owner of the firm also has unlimited liability for the losses. From the financial statements, the business type of R Riggs being sole proprietorship has been concluded with the following justification: The Source of capital for the business provides information that implies capital is generated from a single source.
No additional information is present that is required to be produced in case of partnership. Profit is directly credited to the single capital account. This also implies that the firm is operating under sole proprietorship because, in other forms of business, profit is distributed among partners or shareholders and information regarding the same is presented in financial statements. Drawing of the sole proprietorship is also mentioned separately and no information regarding interest on drawings has been provided. J & B Associates is a partnership firm.
A partnership firm is a kind of business conducted by a small group of people making their respective contribution. This contribution can vary from the amount of capital or partners contributing their capital and/or skills etc. It depends on the mutual understanding between/ among partners. Partners share the profit as well as are liable for the debts according to the rate mutually agreed upon. Justifications for claiming J & B Associates to be a partnership firm are as follows: Capital contribution information is provided separately for the two partners which imply that the operations of the firm are under two partners. Profit is also shared between two partners.
The profit-sharing ratio between two partners is 60-40 as extracted from the information provided in the income statement. Drawings from partners, interest payable on drawings and interest paid to partners on capital as provided in the balance sheet confirm that firm is operating under partnership mode of business.
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