Zero Based Budgeting System Using Envelopes
Budgeting is the start of all financial planning. Till a person is not able to take full control of their most powerful wealth-building tool i.e. their income, they will not be able to obtain personal wealth. There are many different budgeting systems which are available in the market. There are also some mobile applications that […]
How Changes in Interest Rates Affect Bonds ?
Interest rates are one of the most important factors while determining the bond value. All other factors like payments, number of periods etc are standard i.e. the numbers supplied to us are the numbers that have to be used in the formula for calculating present value. However, this is not the case with interest rates. […]
The Finance behind the Plastic Problem
The plastic problem has become a major talking point across the entire world. Almost every country in the world is alarmed with how much plastic is being used and the effect it has on the environment. Plastic is an extremely convenient product to use. However, the problem with plastic is that when it is disposed […]
Net Present Value Calculations
The net present value (NPV) is the most important concept in corporate finance. It is on the basis of this concept that investment decisions are made or not made. It is on the basis of this concept that stocks and bonds are valued. Thus, it is an absolute imperative for any student of corporate finance […]
Peer to Peer (P2P) Business Model
The internet has enabled the functioning of various new types of business models. The peer-to-peer business model is one such business model which has recently come into existence. Companies such as Outdoorsy and BlaBlaCar have transformed the way in which individuals and small businesses interact with one another. LinkedIn is one of the biggest names […]
Every activity that a business firm does must be done for a reason and accounting is no exception. Accounting helps the company achieve a myriad of objectives. Here is the list of objectives that accounting helps the company to obtain.
Any business firm needs a permanent record of the transactions that it indulges in. These records could be required for internal purpose, for taxation purpose or for any other purpose. Accounting serves this function.
Whenever the organization commits any resource of monetary value either within the firm or outside the firm, a record is made. This permanent record is held on for years and can be retrieved as and when need be.
A business firm may indulge in numerous transactions every day. It may make profit in some of these transactions while it may make losses in some other transactions. However, the effect of all these transactions needs to be aggregated over a period of time.
There must be daily, weekly and monthly reports which provides information to the organization about how well it is performing its activities. Accounting serves this purpose by providing periodic financial statements which help the firm adjust their operations accordingly.
Firms need resources for their functioning. They do not have any capital stock at hand and need to obtain them from investors. Investors will give money to the firm only if they have reasonable assurance that the firm will be able to generate enough profit. Past accounting records help a great deal in proving this. All kinds of investors from banks to shareholders ask for past accounting details before they trust the management with their money.
Firms can also conduct useful internal analysis with the help of accounting data. Accounting records tell the firm what resources were committed to what activity and what time. These records also summarize the return that was obtained from these activities. Management can then analyze past behavior and draw lessons about how they could have performed better and used resources more efficiently.
Accounting helps management and investors look forward. Costs and revenue growths can be projected after substantial data has been accumulated. The assumption made is that the company is likely to behave exactly as it has done in the past. Thus, analysts can make reasonable assumptions about the future based on the past record.
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An Overview of Contracts and Why They are Important to Business and Society
February 12, 2025
