Question

Ch 13 Financial Management Purposes/functions of financial management Different types of accounting What is transaction accounting? What is managerial accounting? What is financial accounting? How does finance protect assets? What are audits? Who audits? What financial statements are produced? How does a HCO assure the reliability of financial statements? What is capital financing? How does the operations budget differ from the capital budget? What is long term debt?

Answer 1

1. The functions of financial management are:

• To facilitate smooth and adequate supply of funds to business
• To ensure that business provides promised returns to the shareholders and stakeholders
• To monitor the efficient utilization of funds
• To facilitate disposal of surplus funds adequately
• To make decisions about the investment of funds in profitable ventures

2. Transaction accounting is the type of business accounting, which is used to reflect on business transactions done in business.

3. Managerial accounting is the type of accounting that focuses on accumulation of the accounting information of business. It includes cost and target accounting

4. Financial accounting is the type of accounting in which business transactions are recorded and classified. It is also involved in the preparation and presentation of financial statements to the stakeholders.

5. Finance uses various asset protection techniques to guard the business’ wealth. Some of the asset protection techniques are buying insurance, accounts-receivable financing, etc.

6. Audits refer to the process of examining the financial statements by a third party which the objective of checking the fair presentation of funds and compliance adherence of business.

7.Auditors from independent third party conduct audits.

8. The basic financial statements are balance sheets, income statements and statement of cash flow.

9. HCOs try to maintain the reliability of financial statements by keeping the transactions transparent and accurate representation in the record books.

10. Capital financing accounts for any capital, which is an outcome of business decisions. This type of financing accounts for debt capital, venture capital, working capital as well as equity capital.

11. The operating budget accounts for the transactions that happen in daily life. Capital budget focuses on the investment strategy of business and is usually long term based.

12. Long-term debts are the type of debts that account for loans and financial obligations that usually last for 1 year.