4. Finance function Flashcards
Five key activities of the finance function
Accounting operations Analysis Planning Decision making Control
Sound stewardship
The recording of financial transactions
Record keeping and stewardship
preparation of financial statements in accordance with legal rules and accounting standards
Components of the finance function
Financial accounting
Management accounting
Treasury management
Internal audit
Financial accounting
production of financial statements in accordance with IFRS and legislation
External reports
Statement of Profit or Loss
Statement of financial position
Statement of cash flow
Investor ratios
Earnings per share
Price/ earnings P/E ratio
Dividend yeild
Earnings per share
profit after tax (less preference shares)
/
weighted average number of ordinary shares in issue
Price/ earnings ratio
Share price
/
EPS
Dividend yield
Dividend per share
/
Current share price
x 100
Integrated reporting
combines reporting on environmental and social issues within the financial reports
Common management accounts reports
Cost schedules
budgets
variance reports
Cost schedules
show the expenses involved in manufacturing units - can be called a cost card
Responsibility of budgets and budgetary control
management accountant
Budgets
CRUMPET
Coordination Responsibility Utilisation Motivation Planning Evaluation Telling
Variance reports
shows actual vs budget
Feedforward control
comparing budgeted results against forecast
Treasury management
working capital management cash management financing foreign currency tax
Evaluating and obtaining finance
Debt - interest payments are tax deductible
Equity - shares are sold
Tax avoidance
the legal use of rules to reduce one’s tax liability
Tax evasion
to use illegal means to reduce one’s tax liability
Tax mitigation
to reduce tax liabilities without frustrating the intentions of parliament
Internal audit
report on the effectiveness of internal controls
report via the audit committee to the board of directors
Prerequisites of fraud
Dishonesty
Opportunity
Motivation
Company secretarial
Duties determined by the board
normally in relation to stat accounts, annual returns, companies house
