Cambridge International AS Level · Accounting (9706)
5 multiple-choice questions marked as you go, and 5 written questions with worked solutions. All on Types of business entity.
A business owner wants to expand their small retail shop and is considering changing the legal structure from a sole trader to a partnership.
What is a significant disadvantage of forming a partnership compared to remaining a sole trader?
A business chooses to lease a piece of machinery rather than purchasing it using a bank loan. What is a possible reason for this decision?
A fast-growing manufacturing partnership is planning to convert into a private limited company. The partners are evaluating the financial and governance implications of this transition.
Which of the following represents a correct evaluation of this change from the perspective of the owners?
Which business entity is owned by shareholders but managed by a board of directors?
When comparing a partnership to a sole trader, which of the following is usually considered a drawback of the partnership structure?
State one disadvantage of a partnership business structure regarding the decision-making process.
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Explain one reason why a business might choose leasing a non-current asset rather than purchasing it through a bank loan.
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A business currently operates as a partnership without a formal agreement. Partner A has provided a loan of \(£100,000\) to the business. The partners are considering converting the business into a public limited company (plc) and replacing the loan with \(4\%\) debentures.
Calculate the change in Partner A's annual interest income and state her new legal status as a provider of finance.
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An entrepreneur is deciding between setting up as a sole trader or forming a partnership with a colleague.
(a) State two advantages of operating as a sole trader compared to a partnership.
(b) Explain one disadvantage that a partnership has regarding the decision-making process.
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A sole trader is considering taking on a partner to expand the business.
(a) Explain how the introduction of a partner could affect the management and control of the business.
(b) Discuss one financial benefit and one financial risk the sole trader faces when moving to a partnership structure.
Write your answer out first, then check it against the worked solution.
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