Accounting

When one wants get into a business, capital is one of the most crucial factors that are necessary for starting a business. There are different methods of acquiring this capital. It may be through leasing or through purchasing of the goods or the resources that maybe needed. By leasing, it means that an entrepreneur pays a certain amount of moneys so that he or she can enter into an agreement with another person who owns the resource. The one who pays is then allowed to use the resource for a specific period of time after which he is expected to pay another amount or stop using the facility. In this case, the one who leases does not have full ownership of the product or the resource. This method applies best to all those resources that are known to depreciate over time as the entrepreneur will not need to set aside some money for depreciation.  (Rath, 2010)

On the other hand, purchase involves the actual buying of the resource or the good.  In this case, the person who buys gains full ownership of the product or the resource and there is no agreement on the usage of the product or the resource. The person is free to do what he may wish to do with the product as long as he is through with the required payment. In case the product depreciates, the person who has bought it will suffer the loss. But at the same time, the person may opt to sell out the good or the resource since he has full ownership unlike in leasehold. (Rath, 2010)

Capital sourcing can also be classified under debt financing. This refers to the act of borrowing money from outside the organization with a promise of returning all the principle with the agreed interest level. This can be classified under lease form of capital acquisition or outsourcing. A good example of debt financing is getting a loan from the bank and then paying at an agreed period of time at an agreed interest. Another example of debt financing is a loan from a friend with a promise to pay within a specific period of time.  (Rath, 2010)
Another form of capital sourcing for the organization is the equity financing. This is a case where an organization sells its shares to some interested parties or people. The people who buy the shares become part of the organization or rather gain some ownership rights over the organization. This means that they enjoy the profit that the company makes in form of dividends. It may also involve a person or the owner of the organization putting some personal money into the company. A good example is a case where a company offers its shares to the stock exchange so that it can get some money for operations which may be done through listing shares in the initial public offering. Another example is a case where a person or rather an entrepreneur puts his personal money or personal savings into the business so that it can expand. (Rath, 2010)

Equity financing is a more advantageous form of capital outsourcing over debt financing in that, there is no payback of the money with interest. Even though one stops being the full owner of a business organization in this case, there are more advantages in that there is no sharing of the huge profit that one may make while paying back the loan with interest. In addition, one is not obligated to pay the loan in case there is no profit made. This is not the case with the debts financing as the debts must be paid with interest whether the business organization made profit of not. Where possible, it would therefore be advisable to source the capital using equity financing over debt financing as it seems to have more advantages and more safer to the business organization or the entrepreneur. (Rath, 2010)