Question

ASSIGNMENT:

1. Define the accounting function of a business.
   • Why is accounting such an important function in business?
   • How might a company use accounting to understand its own financial strengths and weaknesses?
2. Define the Finance function of a business.
   • Why is Finance an important function in business?
   • How might a company use finance to decide whether or not to undertake future projects?
   • What is the difference between short-term financing and long-term financing?
3. Assume that members of Bill family form a corporation called Accounting Software, Inc. (ASI). On December 1, 2013, several members of Bill family invest a total of $10,000 to start ASI. In exchange, the corporation issues a total of 1,000 shares of common stock. What is the effect on the corporation’s accounting equation? Explain your answer.

Requirements:

• Minimum Page Length – 2 full pages (excluding title/header and reference list); 12-point Times New Roman; double spaced; and page numbering.
• Please be sure to answer the entire question to receive maximum credit for this task.
• Use and include information from the weekly course content and outside sources to support the conclusions contained in the paper.
• Be cognizant of spelling, punctuation, and grammar.

Answer 1

1. Define the accounting function of a business.

The primary function of the accounting function in a business is to keep a track record of the financial record keeping. Operational expenses, cash flows, assets, liabilities, etc are analysed and kept a track of at a monthly, quarterly and annual basis.

As a result of this, the accounting function creates an organisation's financial history over a period of time.

2. Why is accounting such an important function in business?

Accounting is an important function in business as it not only keeps a track of the financial reporting of the company, but also helps in creating financial statements and reports for debt raising. Debt allows for the business expansion and thus the accounting becomes an important part of the business expansion.

3. How might a company use accounting to understand its own financial strengths and weaknesses?

The company uses the accounting reports, to understand the different ratios to understand financial leverages. This helps in understanding the debt to equity, debt to revenue and other ratios including the earnings of the company.

The balance sheet allows the company to identify the accounts payable and accounts receivables so that it could plan for the cash flows of the company.

4. Define the Finance function of a business.

the finance function of a business can be classified in three

a) Long term finance for 3 years or more

b) medium term finance where financing is done for a period between 1 and 3 years

c) short term finance for a period of less than 1 year