ALL ABOUT ACCOUNTING :- 5th BLOG

A.              *****ACCOUNTING*****

Hi freinds.,

              Today discuss 5th or final fields in accounting.

    * FINANCE :- 

              the money you need to start or support a business, etc.

              Finance is the management of money, particularly in relation to companies, organisations, or governments. Specifically, it deals with the questions of how and why an individual, company or government acquires the money needed - called capital in the company context - and how they spend or invest that money.

 For eg:- Finance is defined as to provide money or credit for something. An example of finance is a bank loaning someone money to purchase a house.

       #Father of finance:- 

                     Dr. Eugene Fama, sometimes referred to as the “father of modern finance”and who was awarded the Nobel Prize for Economics. Dr Fama is a professor at the University of Chicago and founding board member of Dimensional Fund Advisers. Dr Fama developed a theory known as the Efficient Market Hypothesis. 

* Difference between money and finance :-

              Money is physical coins and bills that you can trade for the services and goods you receive. It is primarily the medium of exchange, while finance is all about how to manage money, especially in a larger sense for companies, agencies and governments.

    *Purpose of finance :- 

The purpose of finance is to help people save, manage, and raise money. Finance needs to have its purpose enunciated and accepted. Students in finance should learn it in their business education.

         * Principles of finance:- 

  Top five principles of finance is :- 

  1. Consistency.

  2. Timeliness.

  3. Justification.

  4. Documentation.

  5. Certification.

  Let's discuss one by one....

     1. Consistency. :- Transactions must be handled in a consistent manner. That is, policies and procedures have been established to address similar types of transactions in a routine manner.

     2. Timeliness. :- Transactions must be handled within a reasonable period of time consistent with time frames outlined for federal agencies, a private sponsor, and Drexel University.

    3. Justification. :- There must be a reason for the transaction that supports the project's goals, and adheres to guidelines outlined by federal agencies, a private sponsor, and Drexel University.

    4. Documentation :- Sufficient documentation to support the transaction must exist. The documentation must be retained, organized, and complete enough to stand up to an audit.

   5. Certification. :- Transactions must be approved and carry all the correct authorizing signatures.

    * Features of Finance :-

Acquisition, Allocation & Utilization of Funds: Finance as a function deals with acquisition, allocation and utilization of funds. A business must ensure that adequate funds are available from the right sources at the right cost at the right time.

      * Major types of finance :- 

There are two major types of business finance, debt finance and equity finance.

      * Debt finance - funds borrowed from a lender that must be repaid with interest.

      * Equity finance - money exchanged for part ownership of your business. This could be your own funds or from investors.

  Three sub-types of finance :- 

  1.Personal Finance:

 Personal finance is the process of planning and managing personal financial activities such as income generation, spending, saving, investing, and protection. The process of managing one’s personal finances can be summarized in a budget or financial plan.

  2. Corporate Finance :- 

Corporate finance deals with the capital structure of a corporation including its funding and the actions management take to increase the value of the company. Corporate finance also includes the tools and analysis utilized to prioritize and distribute financial resources.

          The ultimate purpose of corporate finance is to maximize the value of a business through planning and implementing management resources while balancing risk and profitability.  

  3. Public/Government Finance:-

Public finance is the management of a country’s revenue, expenditures, and debt load through various government and quasi-government institutions. This guide provides an overview of how public finances are managed, what the various components of public finance are, and how to easily understand what all the numbers mean. A country’s financial position can be evaluated in much the same way as a business’ financial statements.

 

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