Finance and Accounting
Very often hear entrepreneurs say for certain what bookkeeping if no use, they argue that the balance sheets only serve to pay taxes, to apply for bank loans, but never accounting is useful for decision making within the empresa.Lo happens is that accounting is another type of lens.
Accounting is a good expression on a person on a particular company, but when out of it. That is, there is absolutely consistent methodology that tells how a company must submit the financial statements, and based on this methodology can read a balance sheet of a company not known and take a more or less certain of where you stand . But be careful, when dealing with finances is from within the company, therefore the elements, the information, much more appropriate for decision making. As the accounting information system used by finance and often how they are prepared the financial statements the financial area, you must rewrite that information to use.
The accounts are not going to discard, let’s not say that it is useless, but warned that accounting is not appropriate for decision making within the company. The basic differences between the accounting and finance is that both have different criteria to measure the same facts. Thus we have:
1 .- Accounting work in the allocation of costs and benefits to an accrual basis. In other words for the accounting matter when you make a sale, when you were born the right to recovery of such sale and not when charged, when he bought the merchandise and when it has to pay.
In contrast, for decisions from the financial point of view using only the criterion of what is perceived, when we really care sales charge, when they receive loans and when we make the disbursements. Then in the accounting work with an accrual basis, while it is done in finance exclusively the criterion of what is perceived.
2 .- The accounting does not take into account the value of money over time and in saying this we do not refer to the problem of inflation, but make reference to the performance or financial value have the time. In other words, the pure profit that is required of an operation for having done or been deprived of making a present consumption for future consumption. This time value of money in the accounts is not specified. Obviously finances takes into account the value of money over time.
3.-Another element to consider is the cost of capital. When we proceed to make an investment that we use all funds have a cost, whether the funds are invested by the owners of the company or that they are orders to third parties. The cost of all capital invested is the best alternative that is disposed to apply the funds to a given project and is what we all know as the opportunity cost. For accounting does not include the cost of equity, while it finances it takes into account, since it is an indispensable element for the calculation of investment projects and also because it is the highest capital cost of all since the owners of the company are those who assume the major risks on each investment project.
4.-In the accounts the cost reductions are more apparent because of the profits, as a loss by the use of some good use. To finance the reductions in contrast, are regarded as an income as a recovery in capital assets, if taken into account the amount of depreciation in the selling price. For example, when we set the sales price of a product within the same we involve-cash costs, a non-cash costs (depreciation of buildings, facilities, fixed assets, etc.). And profit. So if in the selling price of these items are engaging means through the sale price are pulling out of the capital invested, therefore we believe that depreciation is an income, because incomes have increased through the sale price .
5. The accounts valued its assets and liabilities (and according to Technical Resolution No. 6 for its historical value or current market value, whichever was less, but as not having the market value will cost valuation updated. In finance valuations are provided at market value.
6.-As for profitability, accounting always taken into account by using the ratio between the utility and the capital that was applied to achieve that is useful and what is known as economic efficiency, financial or equity . In finance is measured by the internal rate of return.
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