Accounting and Finance within a Business Environment Flashcards
why are accounting and finance objectives used by a business
fundamental way to measure performance
see where main problems are/ weaknesses
benchmark
what would a business use to see if they have reached their financial objective
income statement
balance sheet
what are the benefits of setting financial objectives
transparency for shareholders
provides context for investment
reduce risk of failure
help to secure loan
what are the main type of financial objectives
costs revenue profit cash flow investment
give an example of a revenue objective
maximise sales
give an example of a profit object
have highest profit margin in business
give an example of a cash flow objective
decrease borrowing
what does a business consider before setting a financial objective
size of business
other business objectives
legislation
what does setting clear financial objectives allow the business to do
have things to aim for
employees have better understanding of what business wants to achieve
formulate individual department objectives
internal sources of finance
retained profit
personal money
sale of assets
external sources of finance
loan overdraft Trade Credit Factoring Hire Purchase
long term sources of finance
Loan Leasing debentures Retained Profit Shares Government assistance
short term sources of finance
Over draft Loan Trade Credit Factoring Hire Purchase
which factors affect the choice of finance for a business
time
legal (shares)
quantitative (level of debt)
qualitative (control,less control more shares issued)
what is trade credit
defer payment to supplier
what a debenture
long term loan only available to plc’s
what are the 7 principles of accounting
consistency going concern accruals (matching) materiality objectivity prudence (conservative) realisation
define consistency as an accounting principle
Accounts produced in the same way
define going concern as a principle of accounting
operating as normal
define matching (accurals) as a principle of accounting
Dates used to record financial transactions are when transaction takes place not when payment is made.
define materiality as a principle of accounting
Value of Business needs to be realistic figure, not calculating every asset
define objectivity as a principle of accounting
realistic
define prudence as a principle of accounting
dont overstate values
round down profits
round up costs
define realisation as a principle of accounting
Things are realised (appear) when transaction made, not payment made(Exchange)
what is GAAP
Generally Accepted Accountancy Practice
Framework for accountancy Rules
