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Business organisations and stakeholders

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Accounting records the money side of organisations. The type of organisation affects who owns it and who uses its accounts.

Public and private sector

Public sector organisations are owned and run by the government, such as state schools and hospitals. They aim to provide services.
Private sector organisations are owned by individuals or groups, and usually aim to make a profit.

Sole traders and partnerships

A sole trader is owned by one person who takes all the profit, makes all decisions and has unlimited liability.
A partnership is owned by two or more partners who share capital, skills, profits and losses. Most partners have unlimited liability.

Stakeholders and financial statements

Worked example

A bank is deciding whether to lend £50 000 to a sole trader. What will it look for in the financial statements?

  1. The bank wants to be repaid with interest.
  2. It will check profit and the ability to pay.

Answer: Enough profit and cash to repay the loan and interest.

Key idea

Public sector: government-owned, provides services. Private sector: privately owned, usually for profit. Sole traders and partners usually have unlimited liability. Stakeholders such as owners, lenders, suppliers, employees and government use financial statements.

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