Examining The Relationship Between Accounting And Finance Accounting Essay

Accounting is the methodical or precise recording, coverage, and appraisal of fiscal trades and minutess of a concern. Accounting besides involves the readying of statements or declarations refering assets, liabilities, and results of operations of a concernCIMA defines Management Accounting as the procedure of designation, measuring, computation, analysis, readying, reading and communicating of information used by direction to be after, measure and command within an entity and to guarantee appropriate usage of and answerability for its resources. An of import contrast between the two sections of accounting is that direction accounting is non compulsory in the sense that a company is free to make every bit much or every bit small as it likes and no regulative organic structures or bureaus specify what is to be done, or, for that affair, whether anything is to be done at all.

The exclusive aim of direction accounting is to supply the directors with a elaborate analysis of the cost incurred and to help them develop schemes to increase net incomes andcut down costs. Costing is a map which links both fiscal and direction accounting. Without proper merchandise cost information a fabrication, sweeping or retail organisation would be unable to segregate the cost of sold and unsold end products. Such segregation is indispensable to obtain periodic profitableness measuring.

Introduction of finance

Finance can be defined as the art and scientific discipline of pull offing money. Virtually all persons and organisation earn or raise money and spend or invest money. Finance is concerned with the procedure, establishments, markets and instruments involved in the transportation of money among and between persons, concern and authoritiess.Finance, in another word, can be defined as the direction of the flows of money through an organisation, whether it be a corporation, school, bank, or authorities bureau.

Finance concerns itself with the existent flows of money every bit good as any claims against money.The term fiscal direction, managerial finance, corporate finance, and concern finance are virtually synonymous and are used interchangeably, most of the managerial finance.Finance is regarded as the life-blood of the concern unit. This map involves be aftering, procurance and effectual use of the financess of the concern.

Relationship Between finance and accounting

Finance concerns with history because fiscal accounting is one subdivision of accounting.

Accounting relates to engagement of the historical dealing of an organisation and it leads to readying of fiscal position of the company saying that plus and what liabilities are held by the entity as on the twenty-four hours when relevant period like a twelvemonth ends i.e. Balance SheetFiscal position is concluded from the accounting records ( i.e. balance sheet, net income and loss history ) . Account keeps the record of the organisations income, outgo, plus liabilities and by measuring those minutess finance makes the determination for investing like where to put? How much financess to put? Etc. In a short signifier we can state that where history terminals of maintaining records, finance starts the work by measuring them.

Finance is connected with accounting. The accounting procedure produces one of the indispensable natural stuffs needed to do fiscal determinations, fiscal information. Accounting is a tool for managing merely the fiscal facets of concern operations. It is geared to the fiscal terminals of concern merely because these are mensurable on the graduated table of money values. The differentiation between fiscal direction and direction accounting is semantic one, but the spread between the two is quickly shuting. Financial direction, nevertheless, has the broader significance of planning and control of all activities by fiscal agencies, while direction accounting originally meant the internal direction of finance.

The accountant devotes his attending to the aggregation and presentation of fiscal informations. The fiscal officer evaluates the accountant statements, develops extra informations and arrives at determinations based on his analysis. As a affair of fact, sound fiscal direction is a affair of good accountingAccounting and Finance is a really of import map of any concern either for net income devising or for non-profit devising establishments.

It provides an avenue where a concern analyses its operations in footings of what they own, what comes and what goes out. This write-up looks deeper into the accounting and fiscal procedures in an organisation and the jobs associated with these procedures. The debut portion tries to look into the significance of accounting and finance and the procedures involved in each instance. The chief treatment focuses on deeper diagnosing of the jobs encountered in accounting and fiscal procedures.

Functions of the concern

The map of a concern can be divided into two parts.1 ) Primary map 2 ) secondary mapPrimary map is a map of that sort which is needed fundamentally to run an organisation.

The primary map of concern can be divide into these partsFinance mapProduction mapSelling mapFinance map: finance is regarded as the life blood of the concern unit. This map involves be aftering, procurance and effectual use of the financess of concern. Without finance map it is non possible to run a concernProduction map: The map of production involves doing or production of a merchandise or making services by utilizing human resource, natural stuffs and capital. A figure of procedure, engineering, and techniques are usage for production. It entails works location and layout, works edifice, production planning and quality control. For the production map it involves with human resource map and finance map of concern.

Since production helps in the creative activity of public-service corporations, this has been considered as the most of import map of the concern.Marketing maps: this map is chiefly linked with the distribution of manufactured merchandise or services. It involves with the sale of the merchandise. For that map it uses human resource and finance. For smooth selling of the merchandise, the selling director decides on the merchandise, its wadding and stigmatization, make up one’s minding the distribution channel and advancing the future gross revenues.Secondary map of the concern is accounting.

When a concern comes in an operation, it has its some minutess of income and outgos. Those minutess lies in accounting map of the concern. The secondary map can be divided into these partsCollect and analyse informations from concern minutess.Keep minutess harmonizing to system of accountingPrepare fiscal statementsSend the study to other sections of the concern.

Associating finance with other concern maps

Fiscal direction is an built-in portion of overall direction. It is non a wholly independent. Finance is ubiquitous and it is associated with the programs and consequences of every functional section because every proposal and every determination entails fiscal jobs or has an influence on fiscal consequences. it is closely associated with economic sciences, accounting and interfaces with such countries as selling, production, human resource direction and quantitative techniques.Finance and economic sciences:Finance and economic sciences are closely related. Economicss as defined by economic expert is the survey homo ‘s behaviour in bring forthing, interchanging, and definition the stuffs, goods and services he wants. The definition is slightly similar to our definition of finance.

Finance might be viewed as the survey of economic sciences events in which it is possible to set a rupee mark on the dealing. In this context, finance is an application of economic sciences. The single interested in doing fiscal determination is good served by holding a sound foundation in economic sciences. The nexus between economic sciences and fiscal direction is near. A survey of fiscal direction is likely to be barren if it is divorced from the survey of economic sciences.

Financial direction has, in fact, evolved over the old ages as an independent subdivision of economic sciences.


Finance and selling:Fiscal direction is closely related with selling. The fiscal director while explicating recognition and aggregation policies for the house must confer with the selling director because these policies straight affect magnitude of gross revenues of the house. Whether to sell for recognition, to what extent and on what footings are parts of the gross revenues scheme of a house.

But they have fiscal deductions excessively because the financess will be tied up in receivables must be made available and any displacement in policies will impact on receivables. Therefore this facet of concern determinations involves both gross revenues and finance. Alongside this, the fiscal director will hold to pull upon the basicss of marketing while make up one’s minding whether to put financess in a given concern endeavors and in detecting how to market stocks and bonds ( R.M. srivastava ; 1986 ) .

What selling forces prognosis, the fiscal director so determines the fiscal dimension of the prognosiss.Finance and Production Function:Fiscal direction is besides closely associated with production maps. Any alterations in the production maps may ask capital outgos, which the fiscal director must measure and finance. He is chiefly responsible for providing financess to finance stock list and fixed assets, which must gain sufficient return to cover the dramatis personae involved in securing financess.Finance and human resources direction:Human resources direction, the direction of investing in forces or employees has of import fiscal considerations. At the organisational degree, fiscal director must make up one’s mind whether it would be profitable to finance particular preparation for employees or non.Finance and Quantitative techniques:Fiscal direction is besides closely related with quantitative techniques.

The progress survey of finance requires considerable edification in quantitative methods. An apprehension of statistical techniques appears to be particularly valuable since May fiscal determinations rely on detecting relationship and moving on the footing of these relationships.specificsDebit ( & A ; lb ; )Credit ( & A ; lb ; )Stock 1.1PurchaseFuel powerBuildingWagesMachineryDebtorsCash at bankWagessCarriage outwardInvestingRentStationeryGood willInterest in unsecured bondGross salessShare capitalCreditorsReserve fundNet income and loss appropriation history6 % unsecured bond30000550000500020000010000200000100000250002000050002000001000020000200005000800000450000100002000020000100000Entire

Trial Balance


Closing stock at the terminal of the twelvemonth was of & A ; lb ; 30000Provide Depreciation on edifice at 5 % and machinery at 10 % and proviso for dubious debts to be maintained at 5 % on assorted debitorsOutstanding wage was & A ; lb ; 2000 and rewards were prepaid for & A ; lb ; 3000The Directors decided to pay 10 % dividend on paid up capital and transportation & A ; lb ; 10,000 to the modesty fund out of net income.specificsDebit & A ; lb ;specificsCredit & A ; lb ;To stock 1-1To buyTo fuel, powerTo rewards 20000Less, pre-paid 3000To gross net income c/dTo Depreciationed30000550000500017000228000By gross revenuesBy shuting stock80000030000