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Kultur Dokumente
Dr.A.K.Panigrahi
Accounting
Accounting is the process of recording,
classifying and summarizing the
information that is of financial character.
Its a systematic and scientific recording
system. It is double entry recording system,
which is totally based on basic accounting
equation, that is, Asset = Liabilities +
Capital.
The accounting information system is a set of
input, processing and output procedures
designed to provide the financial information
required by stakeholders of a business.
The inputs are the source documents that evidence the
financial transactions of the business. Source documents are
typically invoices, receipts, deposit slips, cheques, authorized
memos.
The process used in the accounting information system is
double-entry bookkeeping. This ensures that transactions are
recorded in journals in chronological order and posted to
ledgers that sort the transactions into account type order.
The accounting process then delivers outputs in the form of
financial statements that give a view of the financial position
and performance of the business. The three key financial
statements are the Income Statement, Balance Sheet and
Cash Flow Statement.
Users of Accounting Information - Internal
& External
Accounting information helps users to make better financial decisions. Users
of financial information may be both internal and external to the
organization.
Internal users (Primary Users) of accounting information include the
following:
Management: for analyzing the organization's performance and position and
taking appropriate measures to improve the company results.
Employees: for assessing company's profitability and its consequence on
their future remuneration and job security.
Owners: for analyzing the viability and profitability of their investment and
determining any future course of action.
Accounting information is presented to internal users usually in the form of
management accounts, budgets, forecasts and financial statements.
External users (Secondary Users) of accounting information include the
following:
Creditors: for determining the credit worthiness of the organization. Terms
of credit are set by creditors according to the assessment of their customers'
financial health. Creditors include suppliers as well as lenders of finance
such as banks.
Tax Authourities: for determining the credibility of the tax returns filed on
behalf of the company.
Investors: for analyzing the feasibility of investing in the company.
Investors want to make sure they can earn a reasonable return on their
investment before they commit any financial resources to the company.
Customers: for assessing the financial position of its suppliers which is
necessary for them to maintain a stable source of supply in the long term.
Regulatory Authorities: for ensuring that the company's disclosure of
accounting information is in accordance with the rules and regulations set
in order to protect the interests of the stakeholders who rely on such
information in forming their decisions.
FINANCE
1. Finance is the life-blood of business. Without finance
neither any business can be started nor successfully run .
Financial Problems
Wealth Maximization Goal
Allocation of Funds
Maximizing Earnings
Cost of Present & Future Funds
Allocation of Earnings
Conflicting Goal of Management
Structural Changes
-Mergers, Reorganization, Consolidation,
Liquidation, Collaboration & Internal
Restructuring.
The Financial Manager
The financial manager plays a big role in the
management structure of a company.
The main responsibilities of the financial manager are
in planning, acquiring, controlling and utilising funds
in ways that maximise the efficiency of the
orgainsations operation.
In most companies the financial manager occupies a
specialist position in the organisation and plays a
significant role in the planning and decision making
processes of the business.
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FUNCTIONS OF A FINANCE MANAGER
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The Finance Function
The finance function is concerned with three areas:
1. Financing decisions the cost between alternative
sources of funds and their cost;
2. Investing decisions the choice between different
assets to buy;
3. Dividend policy decisions the choice between
reinvesting profits in the business and distributing
those profits to owners.
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Role of finance/financial
manager
Responsibilities of finance manager
Business forecasting
Determination of financial objectives, financial
polices and operational procedures
Estimation of the capital requirements of the
business
Designing the capital structure
Determination of the proper sources of finance
Continued.
Investment decision
Ensuring supply of required funds
Controlling the use of funds
Profit planning
Disposal of surplus or profit, or dividend
decision
Management of working capital
Helping in valuation decisions
Continued.
Wealth maximization
Legal responsibilities
Designing suitable system of providing
information
Keeping track of stock exchange quotations
Co-ordination of the activities of
subordinates
Factors influencing financial
decision
These factors are divided into two parts-
1.Micro economic factor
2.Macro economic factor
Maximization of
Shareholder Wealth!
Value creation occurs when we
maximize the share price for current
shareholders.
Objectives of financial management
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