The paper 'Financial and Management Accounting' is a great example of a Finance and Accounting Essay. Accounting and finance are identified as basic theories that govern business transactions. These two theories define the financial status of a company and organization by providing clear and concise records of a company’ s financial performance. According to Weetman (2006), finance and accounting heavily rely on four core principals. They include; relevance, understandability, reliability, and comparability of the financial statement. These principles are important for the financial data provided to be considered credible. Evidently the process of finance and accounting entails a systematic approach used by businesses to record and summarize the financial state and performance of a business.
This report is going to define finance and accounting, discuss the theories of accounting and finance, and the policies that govern individuals in this area of specialization. Definition of Finance Weetman (2006) defines finance as the evaluation of how money is spent or invested. Finance entails the process of monitoring once assets and investments and making momentary decisions based on them. Thus finance can be narrowed down as the management of cash flow in an institution or personal investments. Definition of Accounting Accounting is the process of collecting data on current economic trends and evaluating how these trends affect the financial success of an organization or individual.
Wood and Sangster (2012) describe accounting as, “ the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information. ” According to Wood and Sangster (2012) accounting is divided into two groups namely: financial accounting and management accounting. Financial accounting and management accounting Weetman (2006) defines financial accounting as the process a company takes to make its financial records public by reporting them to external bodies.
Alexander and Nobes (2010) state that a comprehensive process of financial accounting involves the evaluation of a company’ s income statements, balance sheet, and cash flow. Thus, financial accounting provides an overview of the current financial state that dictates whether a business entity or individual is in a strong position to incur certain expenses. For instance, the financial position of a company will determine whether the company is able to employ new staff, invest in another location, or increase employee pay.
As a result, those working in the department of finance and accounts should be able to understand how different social and economic trends influence financial decisions and offer sound financial advice for business entities and personal use. Financial advisors and accountants are therefore guided by the ability to analyze and interpret data for clients. Management accounting is defined as the process of collecting, measuring, and evaluating financial information for further interpretation. Management accounting involves the process of compiling financial information of a business entity or an individual for external bodies to use (Gray et al.
1996). In most instances, these records are presented to potential investors to an organization or government authorities for the purpose of taxation. The information provided in these records must be credible, clear, and reliable for these external entities to make their decision based on the information provided. Individuals in this department are guided by internal regulatory reforms that govern an institution or organization (Benedict and Eliot, 2012).
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