Importance of Corporate Finance

Corporate finance deals with financial decisions which an organization makes, whether it's investments, analysis of credit, selling of assets or products or acquiring assets. Maximizing corporate value and at the same time manage risks associated with investing in a particular product or project is the main aim of corporate finance. Moreover, corporate finance also studies the short-term and long-term implications of a decision and looks in to matters related with dividends to shareholders debt or equity. Matters related to taxes which a corporation has to pay are also taken into consideration when dealing with corporate finance.

Importance of Finance in Business

Finance for a business can't be undervalued and can be said that it's the lifeline of a business and is required for its well being. It can be said to be a lubricant which keeps the business running. Whether you have a small, medium or large business, you will always need finance, right from the beginning to promoting and establishing your product, acquiring assets, employ people, encouraging them to work for the development of your product and create a brand name. In addition to that, a current business may need finance for expansion or making changes to its products as per the market requirements.

Importance of Personal Finance

Personal finance budgeting is an important part of your long term plans to gain financial stability, especially after retirement. You need to have a clear idea of what you want in future such as the amount of money you want after retirement, the location of a place to live in, etc. You need to have a plan and goal of translating these ideas into reality. You also need to consider the things you have purchased in the past and the kind of things which you will purchase later on. This is an important step as this reflects that your will come up with a retirement planning for the future. You must be capable of identifying the good as well as bad choices you make.

While thinking of a long term plan, budgeting savings becomes an important part of personal finance. Savings would help you to make investments in the future so that you have a secure life. But then, having said that, you also need to take care to keep your expenses to the minimum, which is one of the most important personal finance tips which you should use.

Some of the most common expenses which you can reduce are electricity and water bills. Use these as sparingly as possible, especially when you leave a room, make sure that you switch of the lights. You may also like to know about personal finance planning for the layman, so that you know financial planning.

So these were the importance of finance management, whether for an individual or corporation. Finance is such a thing which it can't be substituted by anything, so make sure you use your finances in the proper order, so that you can secure your future.

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ACCOUNTING PRINCIPLES

What is accounting? This was the first question in my first accounting book, from my first ever accounting class. The official definition in the book provided by the American Accounting Association said, the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information. The main elements and activities of accounting means, firstly, any process of data which identifies, classifies and summarizes the financial events that occur within any organization. And secondly, a reporting system which transmits applicable financial data for concerned people that allow them to evaluate performance, make essential decisions and check the economic resources in the organization.

Basic Accounting Principles

The 4 basic accounting principles mentioned below make up the GAAP in the U.S. Almost all businesses record and report their financial earnings and/or losses for the accounting period under the accounting rules. Issued by the Financial Accounting Standards Board, these rules usually are in alignment with other government entities.

Although, accountants are not asked to follow these rules specifically, these rules have to be followed as closely as possible. They help businesses set criteria which need to be met to assure correct accounting activity, comprehensibility and equivalence of the data. We will break the basic accounting concepts and principles in order to understand them properly.

The Cost Principle

Businesses need to register and report all their assets depending on the actual cost received to the businesses, while gaining those assets rather than the free-market rate of the assets themselves. Cost principle is a reliable method to record and report data. Also, it decreases the chance for elements like predetermined market values to step in with the accounting. Although cost principle is looked as irrelevant, since it refers to the actual value of assets.

The Accrual Principle

Businesses need to register and report revenue when it's earned or made and realized or recognized, and definitely not once the cash for the revenue is received. The accrual principle basically shows the work finished by the company/business and not the work that needs to be done for the future.

The Matching Principle

Businesses get to analyze current expenses and revenues. The matching principle shows the market, how well companies/businesses are doing financially and effective they really are. Similar to accrual principle, the expenses in matching principle can only get recorded and reported when revenue is actually earned.

The Disclosure Principle

Businesses have to disclose their records, so that judgment over their financial status can be made accordingly. But revealing the accounting and financial data of the companies/businesses should not make them decrease unjustified expenses or make incorrect notions.