QUESTION THREE Your uncle, Mr. Mensah is a sole proprietor dealing in building materials in Accra....

 

Transcribed Image Text:

QUESTION THREE Your uncle, Mr. Mensah is a sole proprietor dealing in building materials in Accra. His friend, Kofi Manu has convinced him to convert his sole proprietorship business into a limited liability company. Just last week your Uncle wanted a loan facility from a bank and the bank asked him to submit three years financial statements in addition to other documents. Having learnt the definition of financial accounting and financial statements, your Uncle wants you to help him understand certain issues in accounting. Required: a) Explain four disadvantages of converting the business to a private limited liability company. b) Referring to the definition of financial accounting explain the process that financial transactions have to go through in the preparation of financial 8 marks statements. 12 marks c) Apart from the bank that is asking your Uncle to submit financial statements, identify four other users of financial statements and explain their information needs 10 marks (Total = 30 marks) QUESTION THREE Your uncle, Mr. Mensah is a sole proprietor dealing in building materials in Accra. His friend, Kofi Manu has convinced him to convert his sole proprietorship business into a limited liability company. Just last week your Uncle wanted a loan facility from a bank and the bank asked him to submit three years financial statements in addition to other documents. Having learnt the definition of financial accounting and financial statements, your Uncle wants you to help him understand certain issues in accounting. Required: a) Explain four disadvantages of converting the business to a private limited liability company. b) Referring to the definition of financial accounting explain the process that financial transactions have to go through in the preparation of financial 8 marks statements. 12 marks c) Apart from the bank that is asking your Uncle to submit financial statements, identify four other users of financial statements and explain their information needs 10 marks (Total = 30 marks)

Answer rating: 100% (QA)

a 1 One of the main disadvantages of a private limited company is that it restricts the transfer ability of shares by its articles 2 In a private limi... View the full answer