13. Accounting And Finance Functions Flashcards
What is accounting ?
What are 3 key functions?
Recording, reporting, analysis of fin. Transaction
Functions:
Management
Financial
Treasury
What is financial accounting ?
Annual production of fin. statements according to standards
What are books of prime entry ?
Purchase/sale day books (receipts in/invoices out), cash book (bank trns.), petty cash book, journal(non routine adjustments)
What are 3 financial statements ?
P/L (income and costs)
SOFP (assets,liabilities, equity)
Statement of cash flow (cash in & out)
Financial statements let various stakeholders _____
See How profitable business is
Plan for future
See if can repay loans
Obey laws
Presenting wide view and covering different aspects of business performance is possibles through_____
Integrated reporting
What are 6 types of capital ?
-financial (shares, banknotes)
-manufactured ( goods, assets)
-human (knowledge, skills)
-social ( communities, organisations)
-natural (resources,land)
-intellectual (company knowledge, training)
International integrated reporting council has 7 guiding principles to consider when prepare report :
-strategic focus
-connectivity of info
-stakeholders relationships
-materiality
-conciseness
-reliability
-comparability
What are content elements of iirc framework ?
Governance
Business model
Performance
Strategy
Risks and opportunities
What is management acc ?
Measuring, analysing, interpreting & communicating info to management.
It uses fin acc
What are key mngmnt reports ?
-cost schedule (cost to manufacture 1 unit)
-budget
-variance report ( compares budget to actual result)
How standard cost card can help business ?
-pricing decision
-break even analysis (loss or profit making ?)
-key factor analysis (made in-house or outsource?)
-investment appraisal (should we buy machine?)
Why budget is useful ?
Coordination
Responsibility
Motivation
Planning
Evaluation
After establishing reason why variance occurred business may:
-prevent from occurring again
-repeat favourable variance
-go back to targets from budget
Mangmnt vs Fin accounting what is the purpose of info ?
Mngmnt - to help plan, control and make decisions
Financial - to record financial performance
What treasury management is ?
Corporate handling of all finance
Main function of treasury
1 capital mngmt (monitor to never run out of money)
2 cash mngmt (budgets+overdrafts)
3 financing (monitor investments & loans)
4 foreign currency (monitor ex. Rates)
5 tax ( legally avoid)
How business can raise finance ?
Debt - borrowing, adv: interest against tax, ownership of org. Stays the same, debt is cheaper and secured against assets
Equity - selling stake in the business
adv: dividend can be suspended if profits are low, no security required
