What is finance?

Finance is an art of the business. Finance is all about how to earn, and manage your money.
What are the characteristics of financial accounting?
To know the financial position of the company.
Preparation of necessary accounts & balance sheet as required by statutes
Apprising the owners of the business about the results of the business over a period of time.
Difference between bank and financial institution?
A financial institution is any organization in the business of moving, investing or lending money, dealing in financial
instruments or providing financial services. Includes commercial banks, thrifts, federal and state savings banks,
savings and loan associations and credit unions. Refers to any bank, credit unions or other entity that distribute
cash.
A bank is an organization, usually a corporation, chartered by a state or federal government, which does most or
all of the following: receives demand deposits and time deposits, honors instruments drawn on them, and pays
interest on them; discounts notes, makes loans, and invests in securities; collects checks, drafts, and notes;
certifies depositor's checks; and issues drafts and cashier's checks.
A financial institution may be a bank or an investment company.
Are banks can fix PLR voluntarily?
As per my knowledge the PLR is change by RBI
Why capital is shown on liability side in the balance sheet?
Capital is shown on the liability side of the balance sheet because this is money invested by the owners of the firm into
the
firm
which
is
owed
to
them
by
the
firm
as
debt.
What is ROI?
ROI is the return on investment, whatever we invest in the business we want a certain profit or return that we get after
the sales. Business is not only about producing goods and services but is basically gaining profit. The amount originally
invested in the business is our investment and whatever is the revenue generated after the sales is the return.
How bank will earn profit?
By giving loan on interest
What is the difference between public and private bank?
Public bank are those where the government hold more than 50 % of shares in bank whereas in private bank it is less than
50%.
What is Goodwill? If it is treated as asset in Balance sheet then what is on its opposite side i.e. liability side.
Goodwill is one of the kinds of investment and an Asset. It may be invested in the way of cash, Article and reputation
of the business. Sometimes goodwill is purchased by the company, it is an Intangible asset.
Goodwill is always entered in the Asset side of Balance sheet under the head Fixed Assets, it is treated as a
fixed
asset,
if
it
is
purchased
its
value
is
written
off
per
year.
It nowhere appears in the Liability of side of balance sheet coz it is treated as an asset ... if so purchased then can written
off in debit side of profit and loss account.
Compare Financial Accounting and Management Accounting

What is the scope of finance function?

The finance function is concerned with three types of decisions:
- Financing decisions are the decisions regarding the process of raising funds.
- Investment decisions are the decisions regarding the investment of funds.
- Dividend Policy decisions are strategic financial decisions and they are based on the profits earned by the organization.
As the shareholders are the owners of the organization thus they are entitled to receive profits in the form of dividend.
What are the goals of finance function?
- Profit Maximization
- Wealth Maximization
What is the relation of finance function to other functions of a business enterprise?
A business enterprise has many functions apart from finance function such as production, marketing and personnel. All
these functions are related to the finance function as they all require funds for their execution.
For example: In production function, to produce good quality of goods and proper functioning of various operations
involved in the production function involves investment either in terms of fixed capital or working capital, which is a
finance function. The personnel function deals with the availability of proper kinds of laborers at proper time, their
training etc. All these activities need funds. All the activities or functions are finally related to the finance function. The
success of a business depends on the coordination between these functions.

Explain the following: a)Business Entity Concept b)Dual Aspect Concept c)Going Concern Concept d)Accounting
Period Concept e)Cost Concept f)Money Measurement Concept g)Marketing Concept
a) Business Entity Concept:
According to this concept, the business has a separate legal identity than the person who owns the business. The
accounting process is carried out for the business and not for the person who is carrying out the business. This concept is
applicable to both, corporate and non-corporate organizations.
b) Dual Aspect Concept:
According to this concept, every transaction has two affects. This basic relationship between assets and liabilities which
means that the assets are equal to the liabilities remains the same.
c) Going Concern Concept:
According to this concept, the organization is going to be in existence for an indefinite period of time and is not likely to
close down the business in the shorter period of time. This affects the valuation of assets and liabilities.
d) Accounting Period Concept:
According to this concept, the indefinite period of time is divided into shorter time periods, each one being in the form of
Accounting period, in order to facilitate the preparation of financial statements on periodical basis. Selection of accounting
period depends on characteristics like business organization, statutory requirements etc.
e) Cost Concept:
According to this concept, an asset is recorded at the cost at which it is acquired instead of taking current market prices of
various assets.
f) Money Measurement Concept:
According to this concept, only those transactions find place in the accounting records, which can be expressed in terms
of money. This is the major drawback of financial accounting and financial statements.
g) Matching Concept:
According to this concept, while calculating the profits during the accounting period in a correct manner, all the expenses
and costs incurred during the period, whether paid or not, should be matched with the income generated during the
period.