ACCA-BT: BUSINESS AND TECHNOLOGY
CHAPTER 1: THE PURPOSE AND TYPES OF BUSINESS ORGANISATION
CHAPTER 1: THE PURPOSE AND TYPES
OF BUSINESS ORGANISATION
LEARNING OUTCOME
At the end of the chapter, you should be able to:
TLO A1a: Define ‘business organisations’ and explain why they are formed.
TLO A1b. Describe common features of business organisations.
TLO A1c. Outline how business organisations differ.
TLO A1d. List the industrial and commercial sectors in which business organisations operate.
TLO A1e. Identify the different types of business organisation and their main characteristics:
i) Commercial
ii) Not-for-profit
iii) Public sector
iv) Non-governmental organisations
v) Cooperatives
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ACCA-BT: BUSINESS AND TECHNOLOGY
CHAPTER 1: THE PURPOSE AND TYPES OF BUSINESS ORGANISATION
1.1 Definition of “Business” and “Organisations”
A business can be operated by a single person but when the business expands, more people are required
to run its operations. Hence when business expands into an organisation, it becomes a business
organisation, like the examples in Diagram 1.1
Diagram 1.1: Definition of Business and Organisation
Illustration 1.1: Large Business Organisations
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ACCA-BT: BUSINESS AND TECHNOLOGY
CHAPTER 1: THE PURPOSE AND TYPES OF BUSINESS ORGANISATION
1.2 Business Organisations
Learning Outcome (ACCA Study Guide Area A)
A1a: Define ‘business organisations’ and explain why they are formed.
A1d: List the industrial and commercial sectors in which business organisations operate.
Diagram 1.2: Overview of What Are Business Organisations and Why Are They Formed
1.2.1 Definition of a Business 1.2.2 Why are Organisations Formed?
Organisation
A business organisation is a collection of persons Organisations are formed to overcome the
working to achieve a common objective through limitations of individuals. By creating an
structured and coordinated activities. The organisation, an individual is able to achieve more
purpose of a business organisation is to carry on a effectively and efficiently.
business.
For example: A single person can operate a small
There is a difference between a business and a business, such as a restaurant/ food stall. But in
business organisation: most businesses, there is too much work or too
many tasks for one person to handle.
A business is an operation for making goods
or providing services, usually with the aim of
making a profit. One person can run a
business.
A business organisation exists when two or
more people act together to carry on a
business.
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ACCA-BT: BUSINESS AND TECHNOLOGY
CHAPTER 1: THE PURPOSE AND TYPES OF BUSINESS ORGANISATION
Diagram 1.2.2: Main Stakeholders Groups
1.2.3 Sectors in Which Business Organisation Operate
Business activities can be grouped into different categories, or sectors. It is useful to identify the sector
that a business organisation belongs to because businesses in the same sector often face similar
opportunities and challenges.
Table 1.2.3: Example of business sector classification
Industry / Sector Activity
Obtaining raw materials and by using labour, processes and technology, they
Manufacturing
are turned into a product.
Extractive/Raw materials Mining, processing and refining raw materials.
Energy Transforming one resource (wind) into another resource (electricity).
Intellectual Production Creating intellectual property.
Service Hotels, colleges, universities, banking, advertising and etc.
Please scan the zapper code image given in the box below for additional reading material of Standard Industrial
Classification list (UK).
Additional reading
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ACCA-BT: BUSINESS AND TECHNOLOGY
CHAPTER 1: THE PURPOSE AND TYPES OF BUSINESS ORGANISATION
Check understanding
Topic 1.2: Business Organisations
Learning Outcome (ACCA Study Guide Area A)
A1a: Define ‘business organisations’ and explain why they are formed.
A1d: List the industrial and commercial sectors in which business organisations operate.
Question:
Which statement is false?
A. Organisations require as many individuals as possible to generate maximum profits.
B. Organisations exist to pool resources and convert them into useful outputs.
C. Organisations allow individuals to excel and improve on what they do best.
D. Organisations allow knowledge accumulation and sharing which encourage individuals to
work together and produce high quality output.
1.3 Common Features and Difference of Business Organisations
Learning Outcome (ACCA Study Guide Area A)
A1b: Describe common features of business organisations.
A1c: Outline how business organisations differ.
1.3.1 Common Features of a Business Organisation
Diagram 1.3.1 (i): Common Features of a Business Organisation
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ACCA-BT: BUSINESS AND TECHNOLOGY
CHAPTER 1: THE PURPOSE AND TYPES OF BUSINESS ORGANISATION
Diagram 1.3.1 (ii) Examples of Common Features of a Business Organisation.
1.3.2 How Do Business Organisation Differ?
Business organisations differ for even those that are established for the same purpose and under the same
flagship. The common features that help to distinguish the different business organisations are as follows:
Diagram 1.3.2: Common Features
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ACCA-BT: BUSINESS AND TECHNOLOGY
CHAPTER 1: THE PURPOSE AND TYPES OF BUSINESS ORGANISATION
Check understanding
Topic 1.3: Common Features and difference of Business Organisations
Learning Outcome (ACCA Study Guide Area A)
A1b: Describe common features of business organisations.
A1c: Outline how business organisations differ.
Question 1:
All of these are common features of business organisation, EXCEPT
A. Profitability
B. Goals
C. Social limitations
D. Controlled performance
Question 2:
Which of the following does not fall within the definition of an organisation given by Buchanan
and Huczynski?
A. Shareholders in a quoted company
B. Service companies
C. Factories
D. Political parties
Question 3:
WWF and World Vision are dedicated to serving a cause and this differs from commercial
companies such as Exxon and Shell.
Which of the below BEST distinguishes the difference between these companies?
A. Profit motive
B. Ownership
C. Legal status
D. Sources of finance
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ACCA-BT: BUSINESS AND TECHNOLOGY
CHAPTER 1: THE PURPOSE AND TYPES OF BUSINESS ORGANISATION
1.4 Different Types of Business Organisations
Learning Outcome (ACCA Study Guide Area A)
A1e: Identify the different types of business organisation and their main characteristics
1.4.1 Commercial Organisation
Diagram 1.4.1: Commercial Organisation
1.4.2 Other Types of Organisation
Table 1.4.2: Other types of organisations
Not-for-Profit Public Sector NGOs Cooperatives
Size Any size Any size Any size Any size
Presence of legally Presence of legally Presence of legally The owners and
Legal status
separated entity. separated entity. separated entity. entity are one.
Ownership Theoretically Owned by Theoretically Owned by its
and funding owned by the government or the owned by the workers or
public. public. public. communities who
Funding from Funding from Funding by grants take a share of
membership fees, taxes and charges from government profit.
conduct revenue, (could be from or donations. Funding is
generating borrowing). primarily form
activities, and workers or
donations. communities.
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ACCA-BT: BUSINESS AND TECHNOLOGY
CHAPTER 1: THE PURPOSE AND TYPES OF BUSINESS ORGANISATION
Not-for-Profit Public Sector NGOs Cooperatives
Objectives Provide service to To provide a public NGOs are not-for- Not-for-profit
the less fortunate in service because profit entities, their entities, aimed at
the societies. commercial entities aims are related to meeting some
did not do a good social and/or common economic,
job. political needs and social and/or
purposes, e.g. public cultural objectives.
sector.
Examples Charity watch NHS,UK UNESCO British Chambers
Accounting Std Education, UK WHO of Commerce
Board (ASB) Confederation of
British Industry
1.4.3 Advantages and Disadvantages of Different Business Types
Table 1.4.3: Comparison of the advantages and disadvantages of doing business differently
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ACCA-BT: BUSINESS AND TECHNOLOGY
CHAPTER 1: THE PURPOSE AND TYPES OF BUSINESS ORGANISATION
Check understanding
Topic 1.4: Different Types of Business Organisations
Learning Outcome (ACCA Study Guide Area A)
A1e: Identify the different types of business organisations and their main characteristics:
i) Commercial
ii) Not-for-profit
iii) Public sector
iv) Non-governmental organisations
v) Cooperatives
Question:
A sole trader is person who ____________
A. Sets up the safest form of business organisation
B. Has exclusive responsibility towards the owner
C. Is legally liable for any debts of the business
D. Forms a business with another single person.
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ACCA-BT: BUSINESS AND TECHNOLOGY
CHAPTER 1: THE PURPOSE AND TYPES OF BUSINESS ORGANISATION
1.5 Summary: Chapter 1
Diagram 1.5: Summary of the purpose and types of Business Organisation.
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ACCA-BT: BUSINESS AND TECHNOLOGY
CHAPTER 1: THE PURPOSE AND TYPES OF BUSINESS ORGANISATION
1.6 Chapter 1 Check Understanding: Answers
Topic 1.2: What are Business Organisations and Why are they formed?
Answer:
1. A
Topic 1.3: Common Features and Differences of Business Organisations
Answer:
1. C
2. A
3. A
Topic 1.4: Different Types of Business Organisations
Answer:
1. C
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