118 Accounting: Business Reporting for Decision Making
3.21 LO4
For a partnership to be legal, the agreement should:
a. be in writing.
b. indicate a sharing of a bank account.
c. indicate how profits or losses are to be shared.
d. have any one or more of the above characteristics.3.22 LO9
In Australia, a trust:
a. is an obligation on a person to hold property for the benefit of beneficiaries.
b. pays income tax on profit.
c. has unlimited liability.
d. has all of the above characteristics.3.23 LO10
An advantage of a trust as a form of business structure is that it:
a. is simple to set up, just like a sole trader or partnership.
b. is generally tax effective.
c. possesses limited liability.
d. has all of the above characteristics.3.24 LO9, 10
Under a discretionary trust, a trustee can distribute income and assets:
a. according to government acts.
b. using wide discretionary powers.
c. according to specific items in the Corporations Act.
d. as advised by the principal beneficiary.3.25 LO2, 3
A sole trader in Australia is taxed at:
a. the company tax rate of 30 per cent.
b. the same as the rate of capital gains tax for the owner.
c. the owner’s marginal tax rate.
d. both the rates in (b) and (c) above.3.26 LO2
Shannon, a sole trader operating a small landscaping business, asks you to prepare his balance
sheet (showing his equity) for the year ended 30 June 2017; contributed capital $26 440; profit
$5600; drawings $3600; cash $36 000; fixtures and fittings $10 800; accounts receivable $9000;
accounts payable $13 500; bank loan $13 860.3.27 LO2, 4, 6, 9
From the six scenarios described below, indicate (giving your reasons) the business form each one
is likely to take — sole trader, partnership, company or trust.
a. Conor and Ella wish to start an internet business marketing cosmetics. They are concerned
about the legal issues (e.g. their personal liabilities) for this business once they start trading.
b. Gregory has just commenced a home maintenance business by himself, with the help of $2000
inherited from a rich aunt. He wishes to employ his wife as the bookkeeper.
c. As friends at university, Paul, Ingrid and Jasmine studied commerce. They are now setting up a
small accounting business specialising in taxation returns and investment advice.
d. Two married brothers (Will and Sam), who are both trained and practising plumbers, wish to
combine their businesses into one so that they can share resources and take more holidays.
e. Three engineers (Azil, Danny and Timothy) wish to set up a prospecting business searching for
gold, and they want to list their business on the Australian Securities Exchange.
f. Four members of the Ng family wish to establish an investment business, with the proviso that
additional family members can be admitted as they reach the age of 18 years.