Finance-2.docx

7/27/2019 Finance-2.docx

1/8

2.1 Indentify and briefly discussed the costs of the different source of finance

Factoring: This is allowed for the company which is selling credit by factors. Factors

give the businesses cash in advance (often up to 80% of the value of the debt)

whether the debt is unsecured. They also supply the debtor management servicethat control and collect the debt from business debtors if business pay fees for them.

Bank Loans:A loan is for a fixed amount with a fixed repayment schedule and may

appear on a balance sheet with a specific name telling the reader exactly what the

loan is and its main details. If an enterprise does not generate enough cash from

operating, it will need to borrow funds in accordance with its cash budget. Bank

loans are less flexible than an overdraft and it is for a set period of time. Rate of

interest is lower than an overdraft and secured against the companys assets.

Share Capital: Share capital is the Funds raised by issuing shares in return for cash

or other considerations. The amount of share capital a company has can change

over time because each time a business sells new shares to the public in exchange

for cash, the amount of share capital will increase. Share capital can be composed of

both common and preferred shares. Each share carrying a vote in the management

of the business, managerial control may be limited.

Overdraft:This source is suitable to business that needs capital to solve the small

capital problems, such as cash flow, but they dont need long-term loan. In this case,

they can arrange with bank to issue overdraft with lower interest. The interest is

based on daily basis.

Credit card: Credit card is a very convenient option to make payments for goods

and services that company may require on a day to day basis. Most service

providers will not charge anything extra just because paid by credit card and not in

cash. What's more the credit card company will give a free credit period after which

have to pay off the full amount.


2/8

2.2Importance of financial planning:

It is important to plan finances in order to reap long term benefits through the assets

in hand. The investments that one makes are structured properly and managed by

professionals through financial planning. Every decision regarding our finances can

be monitored

if a proper plan is devised in advance. The following points explain why financial

planning is important.

Cash Flow: Financial planning helps in increasing cash flow as well as monitoring

the spending pattern. The cash flow is increased by undertaking measures such astax planning, prudent spending and careful budgeting.

Capital: A strong capital base can be built with the help of efficient financial

planning. Thus, one can think about investments and thereby improve his financial

position.

Income: It is possible to manage income effectively through planning. Managing

income helps in segregating it into tax payments, other monthly expenditures and

savings.

Family Security: Financial planning is necessary from the point of view of family

security. The various policies available in the market serve the purpose of financially

securing the family.

Investment: A proper financial plan that considers the income and expenditure of a

person, helps in choosing the right investment policy. It enables the person to reach

the set goals.

Standard of Living: The savings created by through planning come to the rescue in

difficult times. Death of the bread winner in a family, affects the standard of living to a

great extent. A proper financial plan acts as a guard in such situations and enables

the family to survive hard times.

Financial Understanding: The financial planning process helps gain anunderstanding about the current financial position. Adjustments in an investment


3/8

plan or evaluating a retirement scheme becomes easy for an individual with financial

understanding.

I have worked in an insurance company that didnt have suitable financial planning

they will get failure and may lead to bankruptcy. The common failure is overtrading

when company do too much things in short-time but they dont care about the capital

and liability, they only concentrate on increasing sale volume. It may result in

shortage of cash. The other failure is having much money but dont have financial

planning with it so the opportunities cost is concerned.

2.3 Information need of this specific information

Shareholders:

Shareholders are important figures in the financing, operation, governance and

control aspects of business. They are part the owners, who invest into the company

in order to get assets, and putting this money into a successful business allows the

company to grow. They are the most important supporter the company has, thats

why it is necessary to build a good relationship between them and the organization.Seeing striving financial information and positive decision making is they key way to

get shareholders interested.

A well run company has shown on an online website how they maintain a good

dialogue with shareholders through proactively organizing meetings and

presentations as well as responding to wide range of enquires and giving the option

to them to receive a full Annual Report and Financial Statements.

Bank:

Bank is committed to be a sophisticated prominent and professional institution,

providing one window service to its customers. The Bank visualizes itself as a full

service institution dedicated to the specialized needs of its niche markets. Bank'sactivities primarily cover the provision of a full range of banking services to the

commercial middle market segments of the country, with increasing emphasis in


4/8

future on the growth of the consumer finance, agriculture and small and medium

enterprise sectors.

Bank's operating strategy is focused on continuous implement of the internalprocedures and operating systems top of its operations. Provide better services to its

customers while ensuring effective control on the quality.

Inland Revenue:

The Inland Revenue is this agency responsible for the collection of taxes and duties,

excluding Custom Duties, Stamp Duties and Transfer Taxes. The Inland Revenue

Department provides a number of key services such as Licensing, Taxpayer

Registration (TRN), General Consumption Tax Registration, Tax Compliance

Certification and Taxpayer Assistance.

Suppliers:

Good purchasing practices are integral to small business success, and few factors

are as vital in ensuring sound purchasing methodologies as the selection of quality

suppliers. Product quality is regarded as an essential factor in selecting a supplier.

Specifics in this realm include the suppliers' statistical process control methods, its

QS-9000 registration, its approaches to problem solving and preventive

maintenance, and its methods of equipment calibration.Employees:

Employees are essential to a well-functioning business and to provide quality service

to consumers. It is important for the business to care for their staff, making sure that

they are happy with working conditions etc. and this is right up there with the

importance of financial matters, because customer service is another key to

returning customers, and if there is not a happy worker then there wont be good

customer service. The productivity of any organization depends on the satisfaction of

the employees, as happier employees also make more profit as they work faster and

harder.


5/8

2.4 A catering companys ledger account, trial balance income statement and

balance sheet

General Ledger

Dr Capital account Cr

Balance c/d- 1000 Cash- 1000

--------- ---------

1000 1000

Dr Rent account Cr

Cash- 700 Balance c/d- 700

---------- -------------

700 700

Dr Furniture Account Cr

Creditor- 4500 Balance c/d- 4500

---------- ------------4500 4500

Dr Advertisement account Cr


---------------- -----------------

150 150

Dr Supplier account Cr

Payable to RHD- 1000 Payable to suppliers- 750

Bank- 500 Balance c/d- 1650

Payable to RHD- 900

------------- ------------

2400 2400


6/8

Dr Water account Cr


------------- --------------25 25

Dr Supplier account Cr

Supplier- 750 Balance c/d- 750

-------------- -------------

750 750

Dr RHD creditor account Cr

Cash- 500 Supplier- 1000

Cash- 500 Supplier- 900

Balance c/d- 900 ------

1400 1400

Dr Debtor account Cr

Catering- 750 Bank-1000Balance c/d- 2000 Cash- 450

--------- Balance c/d- 1300

2750 2750

Susan Horn Catering Company

Adjusted Trial Balance

Jan 30,2013

Debit

Credit

Cash 1000

Rent kitchen space 700

Furniture and equipment 4500

suppliers 1000

advertising 150

Catering and event 750

suppliers 500

stationary 50

Cash received 1000

suppliers 900Cash received 1500


7/8

RHD 500

Catering and event 2000

Cash received 450

Council tax 100

Gas & Elec 175

Water 25RHD 500

Check received 1000

Total 8400 8400

Income statement:

Dr Cr

Particulars Particulars

Rent- 700 Catering- 5700

Advertising- 150

Stationary- 50

Council tax- 100

Gas- 175

Water- 25

Balance statement:

Dr Cr

Particulars Particulars

Capital- 1000 Cash in hand- 1800

RHD suppliers- 900 Cash at bank- 450

Creditors- 4500 Debtor- 1300

Furniture- 4500

Suppliers- 1650

Suppliers- 750

References:

Financial Management, Business Process

http://www.cgi.com/web/en/library/solutions/governments/74073.htm [Accessed

28Feb,2013]

Olga,P. (2008). Accounting information System: Power Instrument For Company

Group Advanced Management.(2)p.1.
http://www.cgi.com/web/en/library/solutions/governments/74073.htmhttp://www.cgi.com/web/en/library/solutions/governments/74073.htm


8/8

James A. Hall. (2008). Accounting Information Systems. Sixth Edition. Cengage

Learning Academic Resource Center: Rob Dewey.

Rising Tide Economics Research Reports, American Institute for Economics

Research June14,1999 p.61-62

Documents

Finance-2.docx