Question

• Demonstrate the role that accounting and financial information play for a business and for its stakeholders.

• Identify the different disciplines within the accounting profession.

• Explain how the major financial statements differ.

• Demonstrate the application of ratio analysis in reporting financial information.

• Explain the role and responsibilities of financial managers.

• Outline the financial planning process, and explain the three key budgets in the financial plan

• Identify and describe different sources of short-term financing and long term financing

Answer 1

ROLE OF ACCOUNTING AND FINANCIAL INFORMATION PLAY FOR A BUSINESS AND FOR ITS STAKEHOLDERS:

Accounting is often called "the language of business". Why? Because it communicates so much of the information that owners, managers, and investors need to evaluate a company's financial performance. These people are all stakeholders in the business they're interested in its actovactiv because they're affected by them. In fact, the purpose of accounting is to help stakeholders make better business decisions by providing them with financial information. Obviously you wouldn't try to run an organisation or make investment decisions without accurate and tmetim financial information, and its the accountant who prepares this information. Accounting as the process of measuring and summarizing business activities, interpreting financial information, and communicating the results to management and other decision makers.

DIFFERENT DISCIPLINES OF ACCOUNTING PROFESSION:

Financial accounting

Public accounting

Government accounting

Forensic accounting

Management accounting

Tax accounting

Internal auditing

Cost accounting

Human resource accounting

REASONS FOR MAJOR FINANCIAL STATEMENTS DIFFER:

Accounting statements are daily or weekly reports of the financial activitiy of a company to provide management with a current snapshot of the health of the company. Financial statements analysis the financial position of a company. These statements would include all depreciation and amortization transactions, taxes, allowances etc..,

APPLICATION OF RATIO ANALYSIS IN REPORTING FINANCIAL INFORMATION:

Ratio analysis is a quantitative method of gaining insight into a company's liquidty, operational efficiency, and profitability by comparing information contained in its financial statements. Ratio analysis is a cornerstone of fundamental analysis. Ration analysis compares line-item data from a company's financial statements to reveal insights regarding profitability, liquidity, operational efficiency and solvency. Ratio analysis can be used to look at trends over the time for one company or to compare companies within an industry or sector.

ROLE AND RESPONSIBILITIES OF FINANCIAL MANAGERS:

Collecting, interpreting and reviewing financial information,

Predicting future financial trends,

Reporting to management and stakeholders, and providing advice how the company and future business might be impacted,

Producing financial reports related to budgets, account payables, account receivables, expenses etc,

Developing long term business plans based on these reports,

Reviewing, monitoring and managing budgets,

Developing strategies that work to minimise financial risk,

Analysing market trends and competitors.

FINANCIAL PLANNING PROCESS AND THREE KEY BUDGETS IN THE FINANCIAL PLAN:

Determining your current financial situation,

Developing financial goals,

Identifying alternative courses of action,

Evaluating alternatives,

Creating and implementing a financial action plan,

Re-evaluating and revising the plan.

SOURCES OF SHORT TERM FINANCE AND LONG TERM FINANCE:

Short term sources: Overdraft agreement, Accounts receivables financing, customer advances, selling goods on installment

Long term sources: Long term loan from a bank, Retain profits, Issue equities and debentures.