PROFESSIONAL DEVELOPMENT COURSE
Specialist qualification in business
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A proficiency award a course of study designed for people who already hold qualifications and/or experience in the discipline. While assuming that you already have a broad understanding of business, it acknowledges that you may have areas of weakness that you need to strengthen; whether that be in marketing, management or something else. The course is designed to allow you to concentrate your studies on the areas you need to strengthen, without needing to revisit the other areas of business studies which you have already mastered.
Note that each module in the Specialist Award in Business is a short course in its own right, and may be studied separately.
How are Business Finances Controlled?
Different businesses manage their finances in different ways. Many business fail because they do not choose and properly implement a sensible approach to financial management. The key factor for good financial management is simple though: always know what you have and do not spend beyond your means.
Keeping records is the starting point for remaining aware of your financial position.
All accounting reports e.g. balance sheet should have a heading featuring the name of the business, the type of report and the date at which it applies.
Category headings and sub-group headings are necessary to ensure that the report provides as much information as possible.
Sub-totals provide a further breakdown of information. One column of figures provides individual figures while a second provides overall totals. In accounting, sub-group totals are written on the same line as the last item in that category.
The dollar sign should be written at the head of each column of figures and in front of the final ‘grand totals.’
Traditionally, final totals are ‘double underlined’ to signify the end of a calculation or report.
A balance sheet is a representation of the financial status of a business at one particular moment in time.
Businesses do not remain static. Each time the business engages in a transaction, changes will occur. For example, assets may grow or decline or change from one form to another or liabilities may be paid off or the owner may invest more into the business.
Profit and the Balance Sheet are Linked
The net profit or loss earned by the business affects the owner’s equity and therefore will affect the balance sheet.
As the owner is entitled to all profits earned by the business, the net profit becomes part of proprietorship. If a loss occurs, it will cause a decrease in the owner’s proprietorship.
Thus, these two reports take care of the five basic classifications of accounting. The basic accounting system has now been covered. From the starting point of source documents, transactions have been entered in journals, posted to ledger accounts, and checked by a trial balance. The information in the trial balance has then been used to prepare a profit and loss statement and a balance sheet.
Analysis and Interpretation of Reports
The main reason for producing accounting reports is to provide information needed for decisions. Final reports can provide a great deal of information on the performance and financial position of a business. A full analysis of a business, however, involves more than reading through columns of numbers. To assess the performance of a business, key figures need to be selected from the reports, and then compared with a goal or standard in order to interpret the financial results.
In analysing the results of a business, the standard comparison can be budgeted figures set by the owner/manager of the business, the previous year’s results, industry averages, performance of similar businesses, and standard economic indicators such as the inflation rate, interest rate, or growth of the economy as a whole.
Some comparisons can be made using figures directly from the financial statements. Other comparisons look at ratios between key figures in the reports.
The aim of ratio analysis is to reduce the large number of items in the balance sheet and profit report down to a set of more informative and easily understood numbers. Ratio analysis looks at the changes in the relationship between items. They help to assess whether changes in items are due to normal growth of a business or whether they require further investigation.
Businesses, when planning for the future, usually take into account the reporting of past results of the business. It is therefore very important that the reporting of information is correct and done is a clear and understood fashion. This allows management to interpret results and make the appropriate decisions for the future.
Accounting is only Part of Managing a Business
Good financial managers do still fail in business.
Managing finances well is necessary to avoid building up more debt than what you have the assets to cover; but without sustainable income; the activity of any business will grind to a halt, even if you have the best financial management in the world.
Learning the type of things covered in this course will not only give you knowledge, but it should foster good habits and a balanced perspective on what is involved in being a success in the world of business.
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