Acounting And Finance Flashcards
Internal and external sources of finance
Internal- retained profits, sale of assets and reducing working capital
External- loans, capital angels, overdrafts, government stipend
Distinguish between short, medium and long term sources of finance
Short term- up to 1 year, medium between 1-3 years and long term over 3 years
How does time affect the choice of finance for a business?
Short term finance would be for finances that effects the day-to-day running of the business whereas long term would be generally for a large project
How does the legal structure affects the choice of finance for a business
Will affect the records that need to be kept and the amount of tax that will be paid on top of the amount as well as the amount of personal liability should there be financial difficulties for the business
How do quantitative factors affect the choice of finance for a business
The assets to liabilities ratio and the cash flow forecasts of the business eg current profitability
How do qualitative factors affect the choice of finance for a business
Business current reputation, reliability of the supplier and the morale of the workforce
How do external influences affect the choice of finance for a business
Current legislation, economic situation, social trends,
What is going concern as a accounting practice
a company that is financially stable enough to meet its obligations and continue its business for the foreseeable future
What is matching accruals as an accounting concept
revenues and expenses should be recognized in the same period
What is materiality as an accounting concept
Items that could impact and investor should be noted in detail based on the GAAP guidelines
What is objectivity as an accounting concept
the concept that the financial statements of an organization be based on solid evidence
What is prudence(conservatism) as an accounting concept
the principle of recognizing expenses immediately and not recognizing income until it is reasonably certain
What is realisation as an accounting concept
Realization occurs when a customer gains control over the good or service transferred from a seller not when the transaction has happened
What is the accounting term for a budget
an estimation of revenue and expenses over a specified future period of time
What is a variance
the difference between actual and budgeted income and expenditure.
