![]() ![]() ![]() Postulates: Apart from conventions, even postulates play a big role in the preparation of these statements. ![]() For example, the valuation of inventory at cost price or market price, depending on whichever is lower. We have to apply these conventions while preparing these statements. Accounting conventions: Accounting Standards prescribe certain conventions applicable in the process of accounting.For this, we need to account for figures of accounts like fixed assets, cash, trade receivables, etc. Recorded facts: We need to first record facts in monetary form to create the statements.Finally, we can now use all this data to generate financial statements.īased on this understanding, the nature of financial statements depends on the following points: Then, we have to process them using all applicable rules and procedures. Thus, we have to first record all these facts in monetary terms. These statements basically include the following reports:įinancial statements are prepared using facts relating to events, which are recorded chronologically. These include shareholders, tax authorities, regulatory bodies, investors, creditors, etc. A company’s management uses it to communicate with external stakeholders. 1.Financial statements are basically reports that depict financial and accounting information relating to businesses. Liquidity, profitability and management are the functions of financial management. Financial management plays two main roles, one – participating in funds utilisation and controlling productivity, two – Identifying the requirements of funds and selecting the sources for those funds. But the activities of these officers change from firm to firm, it become difficult to say the scope of finance. It can be said that all activities done by a finance officer are under the purview of financial management. First – relating to finance and cash, second – rising of fund and their administration, third – along with the activities of rising funds, these are part and parcel of total management, Isra Salomon felt that in view of funds utilisation third group has wider scope. The scope of financial management includes three groups. Scope and functions of financial management: But for increasing the value of the firm in the long run, avoiding such activities are more essential. These trials may give good results in the short run. To earn more profits in short time, some firms may do the activities like releasing of low quality goods, neglecting the interests of consumers and employees. It should be the feature of financial management to increase the long-run value of the firm. It facilitates to protect the interests of various classes of people related to the firm. The implication of financial management is not only attaining efficiency and getting profits but also maximising the value of the firm. Besides, without profits there won’t be finance generation. If finance is properly utilised through plans, they lead to profits. However, financial management shall not be considered as the profit extracting device. According to Raymond Chambers, Management of finance function is the financial management’. All business decisions also have financial implications. It also has relations with other business functions. Its main responsibility is to complete the finance function successfully. Hence it can be said as an important one. Financial management has influence on all activities of an organisation. In other words, collection of funds and their effective utilisation for efficient running of and organization is called financial management. Preparing and implementation of some plans can be said as financial management. ![]()
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