TOPIC: FINANCE AND ACCOUNTING

In these topics we must be able to calculate and interpret a number of financial ratios, limitations and
assess the company performance. There is a close link between finance and accounting, a link that
should often be closer than it is. The theories and concepts in the subject of finance are usually
developed by economists who have inadequate knowledge of the technical details of accounting. It is
important to clarify the relationship between accounting and finance. One role of accounting is what
referred to as the stewardship role. This involves the record keeping activity and the internal and
external audit function with the object of ensuring that the financial resources of the business are spent
on legitimate purposes. This is the part of the accountability process those who run the business, the
directors and managers, are accountable to the owners of the business and in fact toa wider social
constituency. An important part of the accountability process is the production of financial reports.
These are of particular concern to those who provide finance as the reports enable an analysis to be
made of a firm’s past actions to assess its current standing and possibly to form opinions about its likely
future performance.