Economic system

Economics is a social science, like history, geography, politics, psychology and sociology. It is the study of human efforts to satisfy what seems like unlimited and competing wants through the careful use of relatively scare resources. It studies the most important aspects of our linked with production, distribution, exchange and consumption of welfare.

The principles of economics lay the foundations for the way we transact business. The principles of economics underpin all commercial transactions. An understanding of these principles is therefore essential if you are to understand how the business world works.

Economic as a science consists of two disciplines that is of macroeconomics and microeconomics.

Macroeconomics is study of “global” or collective decisions by individual households or producers. It looks at a national or international economy as a whole – e.g. total output, income and international trade etc. In macroeconomics we examine forest not the trees.

Microeconomics deals with analysis of specific economic factors and detail study of their behavior. It studies individual producers, consumers and markets. Besides microeconomics tries to understand what factors affect the prices, wages and earnings. Therefore, the focus of microeconomics study are price or production of a certain product, number of employees, profit or income and expenses of firms or households.

My future speciality

My future speciality is accounting at industrial enterprises. At any industrial enterprise the book-keeping department is an independently functioning department headed by a chief book-keeper. The chief book-keeper coordinates the work of separate sectors of acountint (accounting of materials , of wages, of payments, etc.) Administratively he is responsible to the manager of the enterprise and methodologically – to the superior organization.

The main function of book-keeping department is accounting and control over all economic. Financial and production operations . The book-keeping department drawas up monthly, quarterly and annual reports on how well the enterprise has fulfilled its plans and also issues balance-shits. This is done by means of initial and subsequent checks

The drawing up of initial and subsequent checks is based on single forms used fo various branches of national economy and for different forms of property.

The initial check is made by the chief book-keeper . Subsequent control is exercised by means of month-to-month surveys of the amount of work done, of the amount of money spent out on materials for production as compared to the fixed norms, of the amount of wages paid in comparison to the wages plan.

The introduction of the journal-order system of accounting made it possible to unify drawing up balance-sheets and ease the work of accountants.

Finance and accounting

Many people view the finance and accounting functions within a business as virtually the same. Although there is a close relationship between these functions, just as there is a close relationship between finance and economics, the accounting function is best viewed as a necessary input to the finance function – that is , as a sub function of finance.

However ,there are two key differences in viewpoint between finance and accounting –one related to the treatment of funds and the other to decision making.

The accountant , whose primary function is to develop and provide data for measuring the performance of the firm , assessing its financial position and paying taxes, differs from the financial manager in the way he views the firm’s funds. The accountant , using certain standardized and generally accepted principles, prepares financial statements based on the premise that revenues should be recognized at the point of sale and expenses when they are incurred . Revenues resulting from the sale of merchandise on credit, for which the accrual system. Revenues resulting from the sale of appear on the firm’s financial statements as accountants payable , or accruals .

The financial manager is more concerned with maintaining a firm’s solvency. By providing the cash flows necessary to satisfy its obligations and acquiring and financing the current and fixed assets needed to achieve the firms goals. Instead of recognizing revenues at the point of sale and expenses when incurred , the financial manager recognizes revenues and expenses only with respect to inflows or outflows of cash.

The duties of the financial manager differ from those of the accountant in that the accountant devotes the majority of his or her attention to the collection and presentation of financial data . The financial manager uses these data , either in raw form or after making certain adjustments and analyses, as an important input to the decision-making process. Of course . this does not mean that accountants never make decisions and financial managers never gather data; rather , the primary focuses of accounting and finance are different.