MEANING OF ACCOUNTING Accounting is the process of recording, classifying, summarizing, analyzing and interpreting the financial transactions of the business for the benefit of management and those parties who are interested in business such as shareholders, creditors, bankers, customers, employees and government. Thus, it is concerned with financial reporting and decision making aspects of the business. The American Institute of Certified Public Accountants Committee on Terminology proposed in 1941 that accounting may be defined as, “The art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character and interpreting the results thereof”. DEFINITION OF FINANCIAL ACCOUNTING The term ‘Accounting’ unless otherwise specifically stated always refers to ‘Financial Accounting’. Financial Accounting is commonly carries on in the general offices of a business. It is concerned with revenues, expenses, assets and liabilities of a business Continue reading
Business Finance
Business Finance is that business activity which is concerned with the acquisition and conservation of capital funds in meeting financial needs and overall objectives of business enterprises.
Guidelines for Preparing a Proper Strategy for Debt Recovery
Devising a strategy helps in achieving a set goal or objective. Recovery agents should therefore devise a strategy for debt recovery. The following guidelines would help in preparing proper strategy for debt recovery. The collection process should be compliant to the bank-specific recovery norms and also regulatory guidelines. The collection timing should be synchronized to the cash inflow pattern of the debtors: For example, recovery from salaried employees should be timed when salary is received by or credited to the debtor’s account, normally at the moth-end. In case of SME borrowers the effort should coincide with cash flow on account of sales. In case a collection from agriculturist should be made, then it should be soon after the crops are sold. This will call for knowledge of bank products on the part of agents. It should be the endeavour of the agent that collection Continue reading
Harmonization of Accounting Standards
Many authors have put together different definitions for accounting harmonization in various ways. It would seem not an easy word to define, as neither the European Commission nor other organs of the commission have explicitly defined the concept of accounting harmonization. Some have even complicated the whole concept, by attempting to substitute harmonization with standardization, as if to mean that the process is the same, rather than making it more compatible. In practice, harmonization of accounting standards tends to mean the process of increasing the compatibility of accounting practices by setting bounds for the degree of variations. This can be accepted to be the most suitable definition of the concept. Harmonization of accounting standards has become a highly demanded issue of discussion and debate among accounting professionals around the globe. Accounting Standards are the authoritative statements of best accounting practices issued by recognized expert accountancy bodies relating to various aspects Continue reading
Concept of Capitalization in Financial Management
Meaning of Capitalization Capitalization is an important constituent of financial plan. ln common parlance, the phrase ‘Capitalization’ refers to total amount of capital employed in a business. However, scholars are not unanimous in so far as capitalization is concerned. The term capitalization connotes the process of determining the quantum of funds that a firm would require to run its business. Capitalization is distinct from share capital which refer only to the paid-up value of shares issued and definitely excludes bonds and other forms of borrowings. Similarly, it should be distinguished form ‘capital’. The term capital refers to the total investment of a company in money, tangible assets like goodwill. It is in a way the total wealth of a company. When used in the sense of net capital, it indicates the excess of total assets over liabilities. Here, then, it includes “the gains or profits from the use and Continue reading
Structured Financial Messaging System (SFMS) – Safety System for Electronic Transfer of Funds in India
In November 2001 RBI has introduced the Structured Financial Messaging System (SFMS), an application which would be riding on the backbone of the Indian Financial Network (INFINET) intended as a measure, to ensure greater security in the process of electronic funds transfers. The SFMS provides security in the various electronic funds transfers services introduced by RBI such as he Credit Clearing and Debit Clearing and the retail Electronic Funds Transfer (EFT) system and prevents unauthorized usage Objective and Benefits of Structured Financial Messaging System (SFMS) The usage of the Structured Financial Messaging System (SFMS) over the INFINET would automatically bring the benefits of safe, secure and efficient funds transfers There would also be the added benefit of settlement of inter-bank transfers taking place in the books of accounts of banks maintained with the RBI thereby providing for finality of settlement. Structured Financial Messaging System (SFMS) would have adequate security measures Continue reading
Interface Between Finance and Other Management Functions
Finance is the study of money management, the acquiring of funds (cash) and the directing of these funds to meet particular objectives. Good financial management helps businesses to maximize returns while simultaneously minimizing risks. Financial management is an integral part of overall management and not merely a staff function. It is not only confined to fund raising operations but extends beyond it to cover utilization of funds and monitoring its uses. These functions influence the operations of other crucial functional areas of the firm such as production, marketing and human resources. Hence, decisions in regard to financial matters must be taken after giving thoughtful consideration to interests of various business activities. Finance manager has to see things as a part of a whole and make financial decisions within the framework of overall corporate objectives and policies. Let us discuss in greater detail the reasons why knowledge of the financial implications Continue reading