As part of my new college course which I have started from January. I will use this as a chance to share what I am learning with the
@leofinance community while documenting my new lessons by blogging about them for myself. What better way to study my topic in depth than by writing all about it on the chain and for others to read and question it.
Objectives
Main body
Traditionally there are three types of finance and accounting functions.
Financial accounting:
Recording of past transactions and creating statements of transactions. Profit/loss statements, cashflow statements ect...
Management accounting:
Day to day control of accounts. Budgets, costs, analysis ect...
Financial management:
Long term financial planning. Forecasts and appraisals.
The function of a financial manager is to get the best return on investment for their investors.
There are various faucets to financial management, also called the 6M's
Accounting is then the collection and analysis of financial information which is vital to make more informed decisions. It is vital for planning and financial management.
This information is important to a lot of different parties as it affects a wide range of user groups. The finacial information of a business will show how well that business is running and what measures will need to be taken to ensure further smooth running in the future or what steps will need to be taken to get it running smoothly.
This is relevant to investors, workers, customers, financiers, suppliers ect.... So having accurate accounts will show what is going on and help with the financial planning going forward.
Conclusion
Finance is the the whole body of work that goes into running a business. It has internal and external factors and is based around making the most profit for the inventors. They want a maximum return on investment which only comes from a well run and well planned business model.
Accounting itself is not just the numbers. It is pure information. To make educated decisions, you need all of the information and this is where accounting comes into play. It holds the information needed to plan finances and this will help to make better financial decisions going forward.
This information is relevant to a number of different user groups and effects every part of the process. When creating accounts it is important to know for whom and for what purpose they are being created for maximum effectiveness.
Management accounting is based on the needs of business managers while financial accounting meets the needs of the other user groups.
I think that this should summarize it fairly well. The role that finance and accounting have to play in the running of any business.
