Accounting and Finance within a Business Environment

Question 1

why are accounting and finance objectives used by a business

Answer 1

fundamental way to measure performance
see where main problems are/ weaknesses
benchmark

Question 2

what would a business use to see if they have reached their financial objective

Answer 2

income statement

balance sheet

Question 3

what are the benefits of setting financial objectives

Answer 3

transparency for shareholders
provides context for investment
reduce risk of failure
help to secure loan

Question 4

what are the main type of financial objectives

Answer 4

costs
revenue 
profit 
cash flow 
investment

Question 5

give an example of a revenue objective

Answer 5

maximise sales

Question 6

give an example of a profit object

Answer 6

have highest profit margin in business

Question 7

give an example of a cash flow objective

Answer 7

decrease borrowing

Question 8

what does a business consider before setting a financial objective

Answer 8

size of business
other business objectives
legislation

Question 9

what does setting clear financial objectives allow the business to do

Answer 9

have things to aim for
employees have better understanding of what business wants to achieve
formulate individual department objectives

Question 10

internal sources of finance

Answer 10

retained profit
personal money
sale of assets

Question 11

external sources of finance

Answer 11

loan
overdraft
Trade Credit
Factoring 
Hire Purchase

Question 12

long term sources of finance

Answer 12

Loan
Leasing
debentures
Retained Profit
Shares
Government assistance

Question 13

short term sources of finance

Answer 13

Over draft
Loan
Trade Credit
Factoring 
Hire Purchase

Question 14

which factors affect the choice of finance for a business

Answer 14

time
legal (shares)
quantitative (level of debt)
qualitative (control,less control more shares issued)

Question 15

what is trade credit

Answer 15

defer payment to supplier

Question 16

what a debenture

Answer 16

long term loan only available to plc’s

Question 17

what are the 7 principles of accounting

Answer 17

consistency 
going concern 
accruals (matching)
materiality
objectivity 
prudence (conservative)
realisation

Question 18

define consistency as an accounting principle

Answer 18

Accounts produced in the same way

Question 19

define going concern as a principle of accounting

Answer 19

operating as normal

Question 20

define matching (accurals) as a principle of accounting

Answer 20

Dates used to record financial transactions are when transaction takes place not when payment is made.

Question 21

define materiality as a principle of accounting

Answer 21

Value of Business needs to be realistic figure, not calculating every asset

Question 22

define objectivity as a principle of accounting

Answer 22

realistic

Question 23

define prudence as a principle of accounting

Answer 23

dont overstate values
round down profits
round up costs

Question 24

define realisation as a principle of accounting

Answer 24

Things are realised (appear) when transaction made, not payment made(Exchange)

Question 25

what is GAAP

Answer 25

Generally Accepted Accountancy Practice

Framework for accountancy Rules