Friday, February 14, 2020

The Proprietary versus the Entity Theory Essay Example | Topics and Well Written Essays - 2000 words

The Proprietary versus the Entity Theory - Essay Example The proprietary theory suggests that business or other organizations tend to belong to one or more persons thought of as proprietors or owners, and their views are reflected in the accounting process used by the business. So assets of the business are considered as assets of the proprietors and their liabilities are considered as their liabilities. The balance sheet equation would thus be "Assets—Liabilities = Proprietorship.'' (Riahi-B, 2004) The stockholders are seen as individuals joined in owning a business and a corporation is thus not seen as fundamentally different from a sole proprietorship. The corporation is seen as a "device of a representative nature by means of which the association's business affairs may be conveniently administered with certain legal privileges and within certain legal limitations."' (Riahi-B, 2004) Using a proprietary theory, in accounting practice, the emphasis is on the proprietor's equity and the proprietors' net income and changes in income or other aspects of the proprietorship. The retained earnings also belong to the proprietors. However stockholders are distinct from creditors and the distinction is based on proprietorship as creditors may not be proprietors but stockholders are usually proprietors so proprietors in a business organisation include all stockholders. Usually most accountants consider shareholders as owners and proprietorship is more easily determined in a small business enterprise although proprietorships could range from individual proprietorships for each, a partnership, or corporation. Some features that proprietors seek are high profit (including minimizing taxes), little risk, continued existence, ease of sale of interests, etc (Lewis-Pendrill, accessed 2011; Riahi-B, 2004). One criticism of proprietorship is that it is not possible to determine the profits of individual common stockholders of a corporation and corporate profit when equated with personal gain of proprietors defines the propriet ary concept yet there isn't much support to this. The stockholders' share of increase in proprietorship through residual equity shows the applicability of the proprietary concept and stockholder control. Yet stockholders have to be responsive to the wishes of equity interests as they are the owners and have greater control and bear greater risks and rights of residual equity (Riahi-B, 2004, Mourik, 2010). Usually large businesses have stock option plans for their executives along with incentive bonus plans. This has resulted in management interests to increase profits and identify interests with those of proprietors (Hendriksen and Breda, 1992). The entity concept suggests that a business or unit accounted for or considered within accounting practice must be considered as entirely separate from shareholders and owners of the business. Thus the business is seen as not an ownership but a separate entity. The entity is thus seen as having a separate and distinct existence from its owne rs and the owners are almost seen as long term creditors. The balance sheet equation suggests that " Assets=Equities." (Mourik, 2010) However despite the simplicity of the concept , the entity theory faces some confusion and uncertainty and the nature of equities is not completely clear. There are also difference of opinions and although creditors and owners are seen as distinct, accounting processes treat them similarly

Saturday, February 1, 2020

Design a balanced scorecard and linked strategy map and evaluate the Essay

Design a balanced scorecard and linked strategy map and evaluate the techniques used - Essay Example Thornton Chocolate Company has been going through a rough phase, as the company has to deal with consecutive losses. In this scenario development of balanced scorecard and strategic map for guidance become necessary for the company. A comprehensive discussion on balanced scorecard and the key performance indicators, targets, and objectives of the company are also ascertained to develop a strategic map for the company. The strategic map will put forward the strategies by which Thorntons Chocolate Company can pull up sales, minimise cost and increase their market share in the industry. The balanced scorecard has identified the unfavourable effect of performance indicators and stated strategies to pull up company’s performance. Table of Contents Executive Summary 2 Introduction 4 Vision and Mission of Thorntons Chocolate Company 5 Strategic Direction 5 Balanced Scorecard 7 Balanced Scorecard and Thornton Chocolate Company 9 Strategic Map 12 Recommendations 13 References 15 Append ices 16 Appendix 1 16 Appendix 2 16 Appendix 3 18 Appendix 4 19 Appendix 5 20 Introduction Thorntons Chocolate Company was established in the year 1911, in Derbyshire, UK. The company was established by Joseph William Thornton and after the recent takeover of Cadbury it became the largest independent confectionary and chocolate company. Thorntons Chocolate Company has more than 360 cafes and shops and apart from this, it also owns 230 franchises that offer commercial, internet and mail order services. The revenue of the company decreased to ?217,144 million in 2012, which was ?218,255 million in 2011. This reveals a decline in revenue by 0.51percent and the company is also running at a loss since past few years. Thorntons Chocolate Company is listed on the London Stock Exchange and it has more than 4200 employees. Presently the company holds around 7.9 percent of market share in the chocolate industry of UK, which the management expects would increase in the coming years (Jennings, 2005). Reasons like dull marketing, dismal display, or unappealing packaging are being put forward for escalating profit warnings for Thorntons Chocolate Company. The company however, blames it on the climatic condition and snow. Britain’s largest chocolate company has revealed a decrease of 23 percent in chocolate sales in the recent times. The franchises and shops are struggling hard to sell their products in the market. Even the share prices have fallen by 30 percent in the last 1 year, which is also posing as a profit warning for the company. Thorntons Chocolate Company was one of the best selling brands on High street, but the future projections do not reveal the same picture (Jennings, 2005). This study aims to develop a balanced scorecard for Thorntons Chocolate Company and link it to a strategic map. Keeping in mind the recent turn of events and financial position of the company, the balanced score card would be developed and strategic map would be prepared, so that t he management of the company can identify ways of reviving the company’s position and pull it up to the place that Thorntons Chocolate Company had, as one of the largest Chocolate makers (Haberberg, 2008). Vision and Mission of Thorntons Chocolate Company Thorntons Chocolate Company enjoy a 100 years of heritage of treating its customers with delicious confectionaries and chocolate. The vision of the company is â€Å"