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Managerial Finance & Accounting

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    Finance basically deals with the study of stocks, assets, & most importantly money, keeping the risk & time in view. It also performs the most important function of delivering the Financial Services. Managerial Finance is one of the branches of Finance that helps in understanding the significance of financial techniques. Managerial Financу can be better understood with the help of Managerial Accounting & Corporate Finance.

    Accounting refers to a process which consists of identifying the important information & helps in taking the required decisions on that basis.

    Managerial Finance & Accounting     3

    Managerial Finance & Accounting

    Managers make use of various Financial techniques in order to assess or interpret the financial output. They need to know very well about the resource allocation, need to find  out the cost of each & every activity carried out in the organization and most importantly managers should know how to find out the future expenses.

    Managerial Finance also helps in finding out how to make best use of available amount of money, so that the future opportunities may improve & more money could be earned by minimizing the losses. The following Financial techniques can be used to achieve the above mentioned tasks. Valuation: Valuation in finance refers to the process of determining the true value of assets & liabilities.

    Hedging: In order to minimize the business risks arising due to contraction in the demand of any inventory item and let the business earn the profit by manufacturing & stocking the same inventory item, hedging can be used.

    Capital Structure: Capital structure basically is a composition of a corporation’s Liabilities. A way in which a corporation finances its assets through a combination of equity, debts or securities. Capital Structure has a potential to affect the company’s value.

                                    Managerial Accounting & Financial Accounting

    The basic difference between both the forms of accounting is that Managerial accounting helps in providing financial information to the managers of the company so that they can take the necessary decisions to manage the business. On the other hand, Financial Accounting is used to prepare the information collected from the accounting records of the company and is useful for the people outside the organization like suppliers, shareholders, banks, Government agencies etc.

    Managerial Finance & Accounting     4


    Accounting is a process of identifying, measuring, classifying, recording & communicating the financial information to a user so that he can make necessary judgments & decisions based on it. Accounting involves use of Double Entry Book-keeping system. It means that every transaction has two entries to be made; one account is to be debited and the corresponding other account is to be credited. Total of all the debits should always equal the total of all credits to check for errors.

    Accounting provides certain Concepts & Conventions.

    Accounting Concepts
    Entity Concept:  This concept says that the business is a separate entity from its owners. Therefore its is mandatory to record the transactions of the business and the personal transactions of the owner separately.

                      Dual Aspect Concept: Dual Aspect consists of the double entry

                      book keeping. That is each transaction must have two accounts

                      affected, one account is debited and the other is credited.

    Going Concern Concept: The business goes on forever, men may come & go is the basis on which this concept works. Business has the capability of functioning as an ongoing entity.

    Money Measurement Concept: This concept says that every transaction that is recorded is measured in terms of money. This concept also assumes that the unit of measure is stable.

    Accounting Conventions
    Convention of Disclosure: This convention provides that al the

                material information which is useful to the owners, investors etc.must

                be disclosed in financial statements.

                Convention of Consistency: Financial statements should be prepared using

                the same Accounting principles. It is necessary as use of different principles

                & procedures for preparing the statements would lead to incomparable data.

                It doesn’t mean that changes should not be made but should be mentioned in

                the statements.

                       Managerial Finance & Accounting     5


    Singh Wahla, Ramnik. AICPA committee on Terminology. Accounting Termonology

          Bulletin No. 1 Review and Resume.

    ^ Gray R.H., D.L. Owen & C.Adams (1996) Accounting and Accountability: Changes

          and Challenges in Corporate Social and Environmental Reporting (London: Prentice

          Hall), Ch 1

    Evgeny Lyandres & Alexei Zhdanov november2006

    Beaney, Shaun, “Defining corporate finance in the UK”, The Institute of

         Chartered Accountants, April 2005

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