Business form Illustration 1 & 2

posted Sep 25, 2014, 10:57 AM by Surendra Dhanpaul   [ updated Sep 25, 2014, 10:58 AM ]


   John Doe  Jane Doe
 Cash  3,000,000  2,000,000
 Land and Building  7,000,000  8,000,000
 House Furniture & Appliance  700,000  -----------
 Motor Vehicle  2,000,000  1,500,000
 Bakery Equipment & Building  ------------  3,500,000

John and Jane Doe are two separate individuals who both wish to start a bakery with the above resources. These balances are as at January 1, 2004.

Illustration 1

Sole Proprietor

Both persons can simply obtain licence and start their business. John might have a difficulty since he does not have the equipment and building. He therefore might need a loan to purchase the equipment and building to house these. The amount on this loan is $3,700,000 at an interest of $75,000 per year. This immediately puts him and his personal assets at risk. Nonetheless, he can start. Let us assume that he purchased the fixed assets needed on January 1.


Either of the two can incorporate the business under a special name. Note that the names of the two should be different. Both of them cannot operate under Doe’s Bakery. The names must be unique. If John incorporates and invests $500,000 in shares (500,000 shares at $1.00 each) and borrows the rest from the bank then the company is completely liable for the loan. The amount on the loan is $3,700,000. The businesses are separate from the owners.


Both John and Jane can pool their resources together and open the bakery. The two of them agree that Jane will invest the equipment and building along with $500,000 cash. John will invest an additional $2,500,000 into the business. Jane will have nothing to do with the operations (management) whereas John is the General Manager who will receive a salary of $50,000 per month. They both agreed that fuel will be paid for by the partnership not exceeding $10,000 per month each. They are both unlimited partners. Profit sharing ratio is 50:50.


Illustration 2

Sole Proprietor

John Doe
Balance Sheet
As At January 1, 2004
   $  $
 Fixed Assets    
 Equipment & Building
 Current Assets    
 Loan (Long Term)
John Doe Bakery Inc.
Balance Sheet
As At January 1, 2004
   $  $
 Fixed Assets    
 Equipment & Building
 Current Assets    
 Loan (Long Term)
 Owners Equity    
 Share Capital  500,000 @ $1.00 each
 Statutory Reserves

John & Jane Doe Bakery
Balance Sheet
As At January 1, 2004
   $  $
 Fixed Assets    
 Equipment & Building
 Current Assets    
 Loan (Long Term)
 Fixed Capital

 3,700,000  3,700,000
  Current Capital





posted Sep 20, 2014, 4:34 PM by Surendra Dhanpaul   [ updated Sep 20, 2014, 4:58 PM ]

Guyana - not Ghana, is a country located on the south eastern coast of South America. It's bordered by Brazil, Venezuela, Suriname and the Atlantic. Guyana gained its independence in 1966 from Britain and is the only English speaking country in South America. 

I was born and raised in rural Guyana having not left my home town until I was 16! This is mostly due to over protective parents, but then again, I turned out great.

Almost everything in Guyana is cheap. In fact, it is the cheapest country I have ever visited and I visited quite a few. Here is a list of the common things among countries:

Item  Price USD
 Taxi around the city  $1.50
 Bus transport for over 30 miles  $3.00
 Beer (local)  $1.25
 Used car (good condition)  $10,000
 Bottle water (1L)  $1.00
 Bottle soda (20 oz)  $0.50
 Full course meal  $5.00
 Labour rate (per hr) - simi skilled  $1.75

Being one of the cheapest places, you'd come to expect a high crime rate. I have to admit that crime is high. I personally got robbed 4 times while living in the city but I continued to live there until I migrated to the USA. 
My brother said it best, if u get robbed down a particular street... don't walk down that street. 

Business form part 3

posted Jul 29, 2014, 4:53 PM by Surendra Dhanpaul

It was too much information to put in one blog entry part 2 and so I decided that I will split this section. 

This is the extent to which creditors have claims against assets. Limited Liability means that creditors cannot claim against personal property. Unlimited Liability means that a person is directly liable to creditors for his debts and therefore creditors can claim against his house and land.
  • Sole Proprietor – he has unlimited liability.
  • Corporation – it has limited liability.
  • Partnership – can have either limited or unlimited. It can also have both.
See illustration 3

  • Sole Proprietor – all profits belong to the owner.
  • Corporation – profits belong to the Corporation.
  • Partnership – profits belong to the individual partners split in agreed ratio.

  • Sole Proprietor – since all profits belong to the owner, taxes are only assessed once.
  • Corporation – taxes are assessed and payable twice. First, after profit is computed the company has to pay corporation tax. This is charged at 35% on profit and no allowance is given to this artificial person. After corporation tax is paid, it is time to distribute profit to shareholders. This is called dividends. If the value of dividends payable to shareholder is greater than allowances then the company has to deduct income taxes accordingly. This is the principle of double taxation.
  • Partnership – partners are responsible for paying their own taxes on profits received. The computation is similar to those of the sole proprietor.
See illustration 4

Property and expenses allowed
  • Sole Proprietor – only expenses that lead to the generation of revenue is allowed. Personal rent, fuel for personal vehicle, etc are not allowed since these do not lead to the generation of revenue (unless you can prove otherwise).
  • Corporation – any expense incurred to a property in the name of the Corporation is chargeable as expense to the Corporation. This is a good thing since you can be living for free in the name of the Corporation.
  • Partnership – this is based on the agreement between partners whether the expense should be incurred by the partnership or not. For example, partners may agree on specific fuel limit, rent limits, etc. so as to avoid conflict in interest.

Employees and being employees
  • Sole Proprietor – being and employee or putting himself/herself on payroll is pointless and makes no difference in calculation of income taxes. Remember, the owner is the business. If the business is in the name of the husband, the wife can earn a salary and charge as expense and visa-versa.
  • Corporation – if the shareholder is employed by the company then this will reduce profits and the amount of corporation taxes that the company has to pay. However, this will have no effects on personal income tax. Note also, directors are not entitled to salary, however, since one person can form a company he or she can be the manager, who is an employee of the company.
  • Partnership – salaries (if any) are specified in the partnership agreement. Much care should be taken by both partners in determining salaries as this affects the profits but has no effects on personal income tax.

Tax avoidance tip – Tax avoidance is done by means of allowance such as allowance for working through lunch, meals provided when persons work through lunch, station allowance or out-of-town allowance and a travelling allowance. All should be in proportion to the basic taxable income and justifiable.

  • Sole Proprietor – when the proprietor of a business dies, the business dies too. It may be transferred by means of will or other documents, but, the licences will also have to be transferred out of its previous owner to its current owner’s name. This in it self is the closing of one business and starting of another.
  • Corporation – it doesn’t die if the shareholder dies. This is the concept of unlimited life. It can be wound up by shareholder voluntarily or forced into receivership. Receivership does not mean that the Corporation is completely closed, it has only ceased operation and assets are now dissolved (sold for cash) in order to pay liabilities. Receivership is usually called for when dealing with the bank.
  • Partnership – ends every time a new partner enters of an old one leaves, thereon forming a new partnership.

Business form part 2

posted Jul 29, 2014, 4:45 PM by Surendra Dhanpaul   [ updated Jul 29, 2014, 4:55 PM ]

As promised I am going to continue in my attempt to blog about how business forms differ. Again, I know that you can find all this information elsewhere online but I try to keep it as simple as possible in helping you understand these forms. 

  • Sole Proprietor – this is a one person business where the owner/investor/entrepreneur is the same as the business. 
  • Corporation – has legal personality. This means that it is an artificial person that can own assets, enter contracts, sue and be sued in its own name. The name ends in Inc.
  • Partnership – This is a business venture between two or more persons. The manner in which profits are shared, salary earned, interest on drawings and capital charged, etc is specified in the partnership agreement. This is preferably written.
  • Sole Proprietor – this is very easy to start. One simply gets the licence needed to operate in that business sector and start operation.
  • Corporation – this is complex to start. In Guyana and only in Guyana, one man can form a corporation. The person must go to Registrar of Deeds and follow the prescribed format in filing to form a corporation. Once the business has been incorporated, it is time to obtain licence in the name of the corporation. Once these are obtained, the corporation can start operations.
  • Partnership – the first step will be to form the partnership agreement. After this, the partners will need to apply and uplift licence to operate their business. After the licences are obtained, the business operations can start. 
See illustration 1

Government Control and Legal Obligation
  • Sole Proprietor – this form of business is not subject to much government control in relation to the accounting and form the Financial Statements take. Most of the control that government will exercise will be in regards to operations and maintaining standards for your products and services. Nevertheless, books of accounts must be kept.
  • Corporation – this form of business is subject to many government regulations. The format of the Financial Statements must take a particular format. It also attracts the intervention of government when it comes to standard of products and services. Books of accounts MUST be kept and in addition to that, books must be audited.
  • Partnership – this has semi-governmental controls. The format of the Financial Statements should take a particular format and here again there must be standards of products and services to upkeep. Books of accounts must be kept but need not be audited.
See illustration 2

  • Sole Proprietor – the business is owned by the investor. If the ownership changes then it is basically a new business all together as all the licences would have to be transferred out of the name of previous owner to current owner.
  • Corporation – it is owned by shareholders. Its ownership can be transferred without affecting the start and stop of the business. The business remains the same even if the owners of the shares change.
  • Partnership – the partners are all part owners of the business. 

Business form part 1

posted Jul 28, 2014, 4:55 PM by Surendra Dhanpaul   [ updated Jul 29, 2014, 4:55 PM ]

One of the questions many entrepreneurs hear from their accountants / lawyers and even friends is "is your business registered?" Well registration of a business can take a few forms. The primary forms are:
1. Sole Proprietor
2. Incorporated (Corporation)
3. Partnership

In this section I will give you a brief summary comparison of how these forms differ. 

Summary Comparison


 Sole Proprietor Corporation Partnership
 1. Start upSimple, get licence and operateComplex, Follow procedures to formation, get licence and operateSemi-simple, develop partnership agreement, get licence and operate
 2. Legal/Gov. ControlLowHighMedium
 3. OwnershipOwned by investorShareholderInvestors/Partners
 4. LiabilityUnlimitedLimited Can be either Limited/Unlimited or Both
 5. ProfitBelongs to ownerBelongs to CorporationSplit base on Agreement
 6. TaxationSingleDoubleSingle
 7. PropertyMust generate Revenue (sales)Whatever is in the Corporation’s  nameBased on Agreement
 8. EmployeeNot employee, makes no differenceAffects profits, makes no difference on income taxAffects profits, makes no difference on income tax
 9. EndDies when proprietor diesDoesn’t die if shareholder diesEnd & begins as partner enters and leaves

I will try to give more details of these comparison in a different post. 

Glossary of Accounting Terms

posted Jul 28, 2014, 3:36 PM by Surendra Dhanpaul   [ updated Jul 28, 2014, 3:36 PM ]

I know that you can find these anywhere else on the internet but I thought it would be worthwhile to add them here as well, increasing the contents on this site. 

This is a listing of accounting terms that are most commonly and widely used in the language of business. You will find a lot of these terms being used in this document and its best that you familiarize yourself with these since it will benefit you always in the future.



Accounting Equation

Assets = Liability + Capital


Probable future economic benefit owned and controlled by the business entity. In other words, assets are what the business entity owns.

Balance Sheet

This is a financial statement that shows the financial position of the business. It contains everything the business owns (Assets) and owes (liability and capital).

Capital or Owner equity

This is the amount of assets provided by the owner. It is also known as net assets.

Cash Flow

Net profit is not net cash. This financial statement serves to reconcile net cash to net profit and further show the inflow and outflow of cash.

Current Assets

Cash and other assets expected to be turned into cash within a year or operating cycle. These include: cash, short term investments, receivables, inventory, and prepaid expenses.

Depreciation or Amortization

This is the cost charged as expense over the useful life of the assets. It is not a method of valuation.


This refers to a decrease in economic benefit that results in a decrease in owner equity. Incurrence of an expense is usually to generate revenue.

Financial Statements

These are formal records of the entity that reflect the state of affairs of the business.

Fixed Assets

These are assets purchased for long term use in earning revenue for the business. Example: land, building, plant and machinery, etc.

Income Statement

This shows the results of the operations (profit/loss) of the business for a fiscal period or any point in time.

Intangible Assets

These are assets that lack physical form or appearance but expect to bring benefits to the company.


This is an obligation of an entity arising from past events. The settlement of a liability (debt) requires transferring of assets or render service. In other words, this refers to what the business owes.

Long term liability

These are debts that are not payable in full within one year.

Manufacturing account

Business entities engaged in converting raw materials into finished goods deal in manufacturing. A manufacturing account is prepared to show cost of goods manufactured.


These are costs that cannot be traced to the end product. Example of these are: rent, supervisor salary, etc.

Prime cost

These are cost that can be directly traced to the finished goods. Example: direct labour, raw material cost, etc.


This refers to income of a business from normal business activity. This is usually from sales or services provided by the business entity.


In corporations, these are owners of the company. Each share, in essence, represents one piece of the company.

Short term liability

These are debt that are payable within one year.

Trial Balance

This is a listing of accounting ledgers and their balances at the end of accounting period.

Ration Analysis

This is very useful tool used in finance and accounting. It uses figures from financial statements and puts them into perspective. Some commonly used ratios are: Quick Ratio, Current Ratio, Leverage Ratios, etc.

Accounting Programs

posted Jul 23, 2014, 4:43 AM by Surendra Dhanpaul   [ updated Jul 23, 2014, 5:04 AM ]

I hear many people talk about one accounting program being better than another. That holds true depending on what you are looking for in the program. They are also very much similar with only few technical difference. 

My two favourite programs are Quickbooks and Peachtree. Once you setup these correctly you will be able to enjoy all the benefits of your accounting program. What it is do you need exactly?

Main reports are:
* Balance Sheet.
* Income Statement.
* Cash Flow Statement.

Sub reports are:
* Audit trail.
* Aged receivable.
* Aged payable.
* Sales tax
* Custom costing reports.

Main functions are:
* Inventory balance and analysis.
* Customer maintenance and analysis.
* Vendor maintenance and analysis.
* Point of sale
* Network and multi-user
* User level security
* Bank reconciliation

You can get all of this and much more out of your accounting programs. All you need to do is set it up correctly. I have set up many of these systems and would be more than happy to help you get your's up and running.

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