Why Finance?

Why Finance?

Why financial professionals are reportedly ahead of human resources pros in understanding the connection between people and business performance could be an interesting analysis in itself. I can see a number of good reasons why finance "gets" strategic human capital management and I think there are some important implications:

• Shifting Business Basics.

Financial training and practice creates an acute sensitivity to business inputs and outputs, yet historically those inputs and outputs were "things." Inventory was the key input/output and, to be honest, finance did not give HR much attention. Direct labor on the automated shop floor was at best a relatively undifferentiated commodity and at worst, a drag on margins to be minimized. However, as the value drivers of business have shifted from things to people, finance has naturally shifted its gaze to understanding the new inputs, which are people, and their outputs. "Employment matters" are now business matters, and have come under more financial scrutiny.

• Increasing Labor Costs.

Finance by nature and training tends to be very cost-aware, if not hypersensitive, to the cost drivers of a business. As labor costs increase in both absolute and relative terms, finance's attention is naturally drawn to that area and analysts start to dig in to understand the source, nature, and purpose of those costs. Where there is cost, there is finance.

• Changing Role of Finance.

Finance as a discipline has spent the last 20-plus years shifting its own role in the enterprise from "bean counter" to business leader. This journey has led finance to grow beyond its traditional core competencies of accounting and financial reporting to create models, tools, and metrics to enhance its ability to understand and provide insight into the whole business.

• It's Personal.

 As noted above, finance has been keen to move beyond its accounting and administration heritage to become a valued business partner. This, in turn, has caused a large and fundamental shift in the talent and skills needed to be an effective finance organization. At every single financial executive conference I have attended over the last decade, a good amount of agenda time was dedicated to the talent acquisition, development, and retention requirements for building and running a highly performing finance shop. Finance has a very selfish reason for focusing on "people issues."

The leading implication of all this is that strategic HR concepts and ideas are crucial to business success today. The finance departments that are aligned with the above reasons have undertaken the transformation necessary to become strategic business partners. We see it with our own customers: As Workday announced today, Sallie Mae selected Workday Financial Management and HCM because it understands the correlation between HR and finance and the value of a unified platform, and it required tools that will allow it to get real-time information about its workforce that impacts critical management decisions.

Many, many more finance departments are either in process of or have yet to begin the transformation journey. So we, as a finance profession and discipline, need to continue to invest in talent and systems capable of improving our ability to understand and measure the investment in and contributions of human capital.

For HR, there is an incredible opportunity to deliver business value (who better to drive strategic HR initiatives?), but to do this HR must continue to evolve, as has finance, from an administrative focus to a business focus. In short, successful HR people of the future will be business people, and effective HR systems will be business systems.

Opinion :

Why financial professionals are reportedly ahead of human resources pros in understanding the connection between people and business performance could be an interesting analysis in itself.

The article was taken from :

http://blogs.workday.com/Blog/why_finance_gets_strategic_hr.html

Balance Sheet

Definition of 'Balance Sheet'

A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.

The balance sheet must follow the following formula:

Assets = Liabilities + Shareholders' Equity

Investopedia explains 'Balance Sheet'

It's called a balance sheet because the two sides balance out. This makes sense: a company has to pay for all the things it has (assets) by either borrowing money (liabilities) or getting it from shareholders (shareholders' equity).

Each of the three segments of the balance sheet will have many accounts within it that document the value of each. Accounts such as cash, inventory and property are on the asset side of the balance sheet, while on the liability side there are accounts such as accounts payable or long-term debt. The exact accounts on a balance sheet will differ by company and by industry, as there is no one set template that accurately accommodates for the differences between different types of businesses.

 

Public Business Entities balance sheet structure

 

Guidelines for balance sheets of public business entities are given by the International Accounting Standards Committee (now International Accounting Standards Board) and numerous country-specific organizations/companys.

Balance sheet account names and usage depend on the organization's country and the type of organization. Government organizations do not generally follow standards established for individuals or businesses.^{[12][13][14][15]}

If applicable to the business, summary values for the following items should be included in the balance sheet:^[16] Assets are all the things the business owns, this will include property, tools, cars, etc.

Assets

Current assets

1. Cash and cash equivalents
2. Accounts receivable
3. Inventories
4. Prepaid expenses for future services that will be used within a year

Non-current assets (Fixed assets)

1. Property, plant and equipment
2. Investment property, such as real estate held for investment purposes
3. Intangible assets
4. Financial assets (excluding investments accounted for using the equity method, accounts receivables, and cash and cash equivalents)
5. Investments accounted for using the equity method
6. Biological assets, which are living plants or animals. Bearer biological assets are plants or animals which bear agricultural produce for harvest, such as apple trees grown to produce apples and sheep raised to produce wool.^[17]

Liabilities

See Liability (accounting)

1. Accounts payable
2. Provisions for warranties or court decisions
3. Financial liabilities (excluding provisions and accounts payable), such as promissory notes and corporate bonds
4. Liabilities and assets for current tax
5. Deferred tax liabilities and deferred tax assets
6. Unearned revenue for services paid for by customers but not yet provided

Equity

The net assets shown by the balance sheet equals the third part of the balance sheet, which is known as the shareholders' equity. It comprises:

1. Issued capital and reserves attributable to equity holders of the parent company (controlling interest)
2. Non-controlling interest in equity

Formally, shareholders' equity is part of the company's liabilities: they are funds "owing" to shareholders (after payment of all other liabilities); usually, however, "liabilities" is used in the more restrictive sense of liabilities excluding shareholders' equity. The balance of assets and liabilities (including shareholders' equity) is not a coincidence. Records of the values of each account in the balance sheet are maintained using a system of accounting known as double-entry bookkeeping. In this sense, shareholders' equity by construction must equal assets minus liabilities, and are a residual.

Regarding the items in equity section, the following disclosures are required:

1. Numbers of shares authorized, issued and fully paid, and issued but not fully paid
2. Par value of shares
3. Reconciliation of shares outstanding at the beginning and the end of the period
4. Description of rights, preferences, and restrictions of shares
5. Treasury shares, including shares held by subsidiaries and associates
6. Shares reserved for issuance under options and contracts
7. A description of the nature and purpose of each reserve within owners' equity

Opinion :

balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.

The balance sheet must follow the following formula:

Assets = Liabilities + Shareholders' Equity

The article was taken from :

http://www.investopedia.com/terms/b/balancesheet.asp#ixzz1ylTk49vc

http://en.wikipedia.org/wiki/Balance_sheet

AN ACCOUNTING OVERVIEW

BAB 8 : AN ACCOUNTING OVERVIEW

An Accounting Overview

Accounting is frequently called the “language of business” because of its ability to communicate financial information abaout an organization. Various interested parties, such as managers, potential investors, creditors, and the government, depend on a company’s accounting system to help them make informed financial decisions. An affective accounting system, therefore, must include accurate collecting, recording, classifying, summarizing, interpreting, and reporting of information on the financial status of an irganization.

In order to achieve a standardized system, the accounting process follows accounting principles and rules. Regardless of the type of business or the amount of money involved, common procedures for handling and presenting financial information are used. Incoming money (revenues) and outgoing money (expenditures) are carefully monitored, and transaction are summarized in financial statements, which reflect the major financial activities of an organization.

Two common financial statements are the balance sheet and the income statement. The balance sheet shows the financial position of a company at one point in time, while the income statement shows financial performance of a company over a period of time. Financial statement allow interested parties to compare one organization to another and/or to compare accounting periods within one organization. For example, an investor may compare the most recent income statements of two corporations in order to find out which one would be a better investement.

People who specialize in the field of accounting are known as accountants. In the United States, accountants are usually classified as public, private, or governmental. Public accountants work independently and provide accounting services such as auditing and tax computation to companies and individuals. Public accountants may earn the title of CPA(Certified Public Accountant) by fulfilling rigorous requirements. Private accountants work solely for private companies or corporations that hire them to maintain financial records, and governmental accountants work for governmental agencies or bureaus. Both private and governmental accountants are paid on a salary basis, whereas public accountants receive fees for their services.

Through effective application of commonly accepted accounting systems private, public, and govermmental accountants provide accurate and timely financial information that is necessary for organization decision making.

Comprehension

1. Answer the following question about accounting. Question with asterisks cannot be answered directly from the text. 3
1. why is accounting called the “language of business”?
2. How is a standardized accounting system achieved?
3. What are revenues and expenditures?
4. What do the balance sheet and income statement have in common? How are they different?
5. *How might the information contained in financial statements be useful to managers? *How might creditors use this information?
6. How are accountans classified in the United States?
7. What kinds of services do public accountants provide?
8. What is a CPA? *Do you have a similar type of position in your country? *Explain.
9. *Which type of accounting-public, private, or governmental-appeals to you the most? *Why?
10. *What are some management decisions that might be based on accounting information?

Answer :

1. According is called the “language of business” because of its ability to communicate financial information about on organization.

2. In order to achive a standardized accounting system the accounting process follows accounting principles and rules.

3. Revenues are incoming money and expenditures are outgoing money.

4. The balance sheet and the income statement are two common financial statement. They are different, the first shows the financial position of a company of one point of time, while the second shows the financial performance of a company over a period of time.

5. The information contained in financial statements might be usefull to creditors in help them to find out whether the company will be able to repay the credit on time or not.

6. In United States, accountants are classified as public, private, and governmental.

7. Public accountant provide accounting services such as auditing and tax computation to companies and individuals.

8. A CPA is a Certified Public Accountant. Yes, we had. Formerly faculty of economic graduates of 5 elite universities got ‘Drs….AK’ degree.

9. Personal question

10. In some company financial decision making might be based on accounting information. For example the management want to expands its business to build a bigger factory to introduce new variety of goods.

Opinion :

Accounting is frequently called the “language of business” because of its ability to communicate financial information abaout an organization. Various interested parties, such as managers, potential investors, creditors, and the government, depend on a company’s accounting system to help them make informed financial decisions. An affective accounting system, therefore, must include accurate collecting, recording, classifying, summarizing, interpreting, and reporting of information on the financial status of an irganization.

This article was taken from:

http://www.google.co.id/search?num=100&hl=en&safe=off&q=an+accounting+overview&oq=an+accounting+overview&aq=f&aqi=g-j1&aql=&gs_l=serp.3..0i18.4996l4996l0l5271l1l1l0l0l0l0l115l115l0j1l1l0.frgbld. http://luphmama.wordpress.com/category/bahasa-inggris-bisnis-1-softskill/an-accounting-overview/