FUNDAMENTALS OF ACCOUNTING
Course Code: ACT001
Unit 1- Business Organizations/Structure/Functions
Difference between Public and Private Limited Companies
Public Limited Company
Shares are sold to the general public. Shares
can be advertised for sale to the general
public, for example, on the stock exchange.
There can be a minimum of 7 shareholders,
and there is no maximum to the number of
individuals who can be shareholders.
There is little or no privacy as financials must
be published and as such are available for
anyone to access details of the firm’s
profitability.
There is no restriction on the transfer of
shares. Hence individuals who no longer want
to be shareholders can easily sell their shares
to others.
Main Differences between the Public and Private Sector
Public Sector
The part of the economy that is owned and
operated by government.
Main aim is to provide goods/services for the
public. Public goods/services provided include
health services, education, etc.
Capital is provided by public funds through
taxation and profits made from public
ventures.
Prices are usually low in order to maintain
affordability for the citizens
Government run entities are usually inefficient
and operations are at loss
Private Limited Company
Shares are sold privately to family members,
friends, or employees.
There can be a minimum of 2 shareholders
and a maximum of 50.
Financials are not published; hence enjoy
greater degree of privacy.
There is restriction on the transfer of shares.
Shareholders wishing to sell their shares must
ensure shares are sold only to individuals who
the other shareholders approve of – family
friends, etc.
Private sector
The part of the economy that is owned and
operated by private individuals.
Main aim to make a profit. Resources are
usually spent only on areas that will be
profitable.
Capital is provided privately by private savings,
borrowing, etc.
Prices are usually higher to cover operational
costs and make as much profits for the entity.
Privately run businesses are more efficient and
businesses tend to be more profitable.
 Stake-holders in a Firm

These are persons and organizations that have an interest in the strategy of the organization.
Stakeholders can be affected by what the organization does.

Stakeholder

Primary Stakeholders Secondary Stakeholders

Internal Connected External

Stakeholders Stakeholders Stakeholders

Internal Stakeholders

Internal Stakeholders are usually members of the organization that are intimately associated
with the organization and their objectives are likely to have a strong influence on how it is run.  

The following is some examples of who these stakeholders might be:

 Directors
 Managers
 Employees (are also called connected stakeholders)

Connected stakeholders, also called primary stakeholders, are those that have an economic or
contractual relationship with the organization. Connected stakeholders often have a significant
stake in organizational activity, by virtue of their contractual or commercial relationships with
the organization. Some examples of connected stakeholders are:

 Company shareholders
 Customers (source of revenue which the business may lose if expectations are not met)
 Distributors/Suppliers

External Stakeholders

External or secondary stakeholders are those who are not directly connected to the
organization. These stakeholders will have an interest in the organizations activities or they
might be impacted by the organizations activities in some way. Key examples:
  Governments
 Interest and pressure groups
 Media and news organizations
 Local Communities

Examples of Stakeholders

Note:

1. Marginal Stakeholders – they are unconcern about their stake in the business
because they are low on both potential for threat and potential for cooperation.
These stakeholders are affected by a firm’s actions but who nevertheless have
no actual or foreseeable influence to shape its strategic goals because their
impact on the firm is very minimal or marginal. Many consider this group to be
insignificant and are not worth discussing when referring to stakeholders.
 Some examples of marginal stakeholders may include:

Professional associations of employees - (not trade unions, but rather

associations that seek to further the interest of a profession. For examples
accountants may be a part of the institute of chartered accountants of Jamaica
(ICAJ), an association that seeks to further the interest and development of the
accounting profession.

Consumer interest groups – Advocacy groups for consumers.

2. Although stakeholders are placed in categories, it is useful to note that there are
often overlapping with the categories. For example – The organizations
customers are also part of the wider community and they might also be
shareholders or even employees.

References

https://www.professionalacademy.com/blogs-and-advice/stakeholder-mapping---marketing-
theories

https://www.acowtancy.com/textbook/acca-f1/a2-stakeholders-in-business-rganisations/
internal-connected-and-external-stakeholders/notes