Tài chính kế toán - The financial cycle

The financial cycleLearning objectivesTo learn about the financial cycle business activities.To learn how to flow chart the financial cycle business activities.To understand the processing of financial cycle transactions using a computer.To know about the various mandatory financial reports.To learn about the control practices and procedures in the financial cycle.key termsasset registerdebentureordinary sharespreference sharesregister of debenturesretained earningsshareholders’ registerstatement of cash flowsstatement of financial performancestatement of financial positionFinancial cycle business activitiesThe functions of the financial cycle are:raising capital by investments from ownersraising capital by loans from creditorsrecording capital-raising transactions in the general ledgeracquiring productive assets using capital and recording the acquisitionmaintenance of assetsrecording various maintenance transactionssummarising accounting dataFinancial cycle business activitiesThe functions of the financial cycle are grouped into three broad categories: Raising capitalAcquiring and maintaining assetsFinancial reportingFinancial cycle business activitiesRaising capitalSharesincorporated companies raise capital by asking the public to apply for shares (ordinary or preference)Debenturesborrowings secured by a charge over the assets of the borrowing organisationRetained earningsprofits retained for future business useRaising capitalLong-term loansloans from banking or other financing institutionsOther sources of capital include:trade creditorsfactoring of debtorsbank loansAcquiring and maintaining assetsCapital raised is invested in fixed assetsFixed assets are used to expand business operations or replace expended assetsMaintenance of fixed assets is recognised as a cost of business operationsFinancial reportingUsed to make accounting entries and period-end adjustments, and produce financial reports or statementsTrial balance is the first step taken when preparing financial statementsFinancial reportingStatement of financial performanceshows the profit or loss made by the organisationStatement of financial positionreveals the organisation’s financial position at any point in timeStatement of cash flowsshows the cash situation at the beginning and end of an accounting period as well as how it has changed between the two dates