Characteristics of the Accounting

The above definition contains four essential characteristics of the accounting:

1. Economic events

2. Identification, measurement, recording, and communication

3. Organization

4. Interested users of information

Economic Events

An economic event has been defined as a happening of consequence to a business entity. Economic events are classified into external and internal types.
An external event, involves the transfer or exchange of something of value between two or more entities. It is called a transaction. The following are some examples of transactions:

• Sale of shoes by XYZ Company to customers.
• Payment of wages to employees by ABC Limited.
• Payment of monthly rent to the landlord.
• Purchase of raw materials by an enterprise from some other business enterprise.
• Purchase of ticket from an airline.

Read the text №3: What is financial management?

Financial management is the scientific manipulation and exploitation of our business and financial environment, using a range of statistical, mathematical, and economics tools, with the aim of making the best economic decision, under prevailing circumstances and availability of information and scarce resources.

Simply put, financial management is an intelligent quest for optimal use of financial and other economic resources at our disposal. Tax matters are also considered.

Everybody engage in financial mgt one way or the other on a daily basis without knowing it- at best, they will call it economizing. An average housewife will seek alternative ways of getting more value for the money she spends.

Financial mgt as a discipline sprung out from economics to become a stand alone profession. That is why we have people that call themselves financial manager and investment managers today.

Importance / significance of financial management

• Economic growth and development: through investing decision, financing decision, dividend decision, and risk management decision, better and more economically viable projects are undertaken by companies. The resultant effect on the economy is economic growth and development. Financial management serve as a good guide to online investing.
• Improved standard of living: growth and development in the economy that is brought about by financial management will ultimately translate into improved standard of living for all.
• Improved health: again, good economic condition and improved standard of living culminates into improved health as a lot of ‘ financial stress ’ related sicknesses will be completely eliminated or reasonably reduced.
• Allows for better financial decision
• Creates jobs – those that teach financial management and the jobs that are created as a result of flourishing economy. Better financial decisions will lead to profitability, and profitability will eventually lead to expansion which will in turn mean more jobs.
• Alleviation of poverty
• Preserve our environment
• Promotes efficiency: good financial management does not give room for wastes and inefficiencies that characterizes poor financial management and decision making.

The importance of financial management can take us a whole lot of space to finish listing. This is to say that the once listed above are just but few.

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