Accounting and Finance Chapter 4

Accounting and Finance Chapter 4

• The subject matter is Accounting and Finance, Chapter 4.
• The slides cover the meaning of Accounting, Finance, and Banking, differences between them, fields of Accounting, and the role of banks in finance and business.
• Essential reading material is provided via links to ebookcentral.proquest.com
• Accounting is the process of identifying, recording, analyzing, and communicating financial information to stakeholders.
• Finance is the study of money, investments, and other financial instruments, focusing on acquiring funds and managing investments.
• Banking is related to accepting deposits and lending money to businesses and individuals for profit.
• Accounting is the art of recording and reporting past financial transactions.
• Financial accounting provides details of a business's financial position
• Finance manages firm assets and liabilities to plan future growth, and helps in decision-making for future projects and asset management.
• Banking accepts deposits, and provides loans and investments to businesses and individuals.
• Accounting end users include management, employees, customers, suppliers, creditors, debtors, shareholders and government.
• Accounting aims at reporting financial information.
• Finance end users are shareholders and management, aims at creating wealth, generating cash, earning profits and effective use of assets.
• Banking end users are depositors and borrowers, with objectives of accepting deposits and granting loans/ advances.
• Accounting types include financial, management, and cost accounting.
• Accounting follows GAAP (Generally Accepted Accounting Principles).
• Fields of accounting include financial accounting, management accounting, and cost accounting.
• Financial accounting systematically records, classifies, summarizes, analyzes, and reports business transactions. This information is presented through income statements and balance sheets.
• Management accounting outlines financial and non-financial data for management to use for making decisions, setting goals, and anticipating strategy.
• Cost accounting is the process of accounting for costs from the point of expenditure, connecting them to cost centers and cost units.
• Cost accounting formally determines and controls costs of goods or services.
• Banks' role in finance includes managing deposits, providing finance to businesses and individuals, clearing checks, paying bills, handling ATM/credit cards, facilitating money market operations, wire transfers, financial advisory, broking, and insurance services.
• Commercial banks are privately owned financial institutions accepting deposits, offering loans, and providing services like documentary collections and international banking.
• Commercial banks accept deposits in various forms, including savings, time, and current deposits.
• Current accounts do not typically offer interest but often allow overdrafts up to a certain limit, and also allow withdrawals as needed.
• The functions of commercial banks include lending of funds (loans and advances), acting as agents (collecting bills, drafts, cheques, insurance premiums, handling securities, estate administration), providing general utility services (traveler checks, lockers, debit/credit cards), handling letters of credit, processing payments/transactions, managing foreign exchange and investment banking.
• Investment banking helps businesses deal with major financial transactions and raises capital via shares and debentures.