Financial Position of a Business Essay Example | Topics and Well Written Essays - 1000 words

Financial Position of a Business - Essay Example In a few cases, they may also be shareholders, and as such - they will be interested in their salaries, job prospects and security. The next group of stakeholders to be influenced by the business is the customers and suppliers. If the business is doing well and the profits and margins are high, the suppliers are happy. If the products are sold in the market at competitive rates, the customers are benefited. The quality and specialty of the product also influence the business to a great extent. Banks and other financial organisations lending money to the business have a stake in it, as they would expect timely repayment of loans, if taken from their bank. The Government , especially the Customs and Excise department, which collects tax from them has a stake in the business. Another category of stakeholders is the Pressure Groups. These groups make sure that the business is acting appropriately in their area of interest. These groups could be acting in the interest of the environment, public interest or related areas. Financial Accounting is the process by which companies produce financial statements for outside users.The users of FA are a faceless group, external users, present and potential shareholders. This accounting system is built around assets, which include the liabilities and the stockholders' equity base. This accounting has a historical time-frame, it is reported as it is. In FA, financial statements are the end product and include primarily financial information. Uses approximations but as a generalization is more precise than MA.The report takes the entire organization into account.This accounting involves taking into account the direct costs i.e costs directly traced to the goods or services and indirect costs ie. costs incurred jointly in producing goods or services. Management Accounting helps managers plan, implement and control the budget and finances of the company. The users of MA are known managers who influence the information which is required. This accounting is more focused on the future and decision-oriented. This analysis contains monetary and non-monetary information. As the management needs information to be useful in decision-making, and therefore, precision is sometimes sacrificed. The report focuses on small parts of the business. The uses of MA include Measurement of revenues, costs, and assets Control. Assist in deciding on alternative course of action. Generally, MAs have the following features Different numbers for different purposes. Many different types of costs: historical, standard, overhead, variable, fixed, differential, marginal, opportunity, direct, estimated, full, etc. Clarify which type you are talking about. Accounting numbers are approximations. Best that we can with incomplete data. Accounting evidence is only partial evidence other factors help make decisions. People not numbers get things done. How you use the numbers is as important as how the