Importance Of Finance As A Decision Making Tool Within Organizational Contexts

2105 Words9 Pages
The following report will justify the use and importance of finance as a decision making tool within organisational contexts. In addition, an application of basic financial techniques will be present in order to analyse the performance of an organisation in 2012 to their performance in 2013. 2.0 Justification of finance as a decision making tool Within organisations, the justification of finance in regards to a decision making tool is critical. 2.1Double-Entry Bookkeeping Within an organisation, bookkeeping is simply a form of recording financial transactions. Dyson (2007)asserts bookkeeping is critical, postulating “bookkeeping may be regarded as the foundation on which the entire discipline of accounting is built”. It is critical…show more content…
The two aspects are acknowledged as debits and credits. Mott (2007) 2.11 Single-Entry Bookkeeping Alternatively, organisations not using double-entry bookkeeping will use single-entry bookkeeping. Single-entry differs from double-entry by not following the “dual aspect rule, with Hanif (2013)stating “transactions are not recorded in their two-fold aspects”. There are limitations of single-entry bookkeeping in comparison to double-entry bookkeeping. Hanif (2013) Fleay et al (2011) Ahmed (2008) Mukherjee and Hanif (2006)postulate that due to single-entry bookkeeping not acknowledging nominal accounts, this results in the “trading and profit and loss account cannot be prepared”. Additionally, single-entry bookkeeping does not have set rules that double-entry bookkeeping has, resulting in potential confusion. Additionally, employers integrating double-entry bookkeeping into their business in comparison to single-entry are able to make better decisions, signifying the critical importance of double-entry bookkeeping, in regards to benefiting employers, guiding them to make better, informed decisions. 2.2 Trial Balance Kimuda (2008)defines trial balance as “a schedule of balance, both credit and debit, extracted from the accounts in the ledger”. In addition, Rich et al (2012)asserts a trial balance explicitly states active accounts and the debit and credit balance of each account. Additionally postulating trial balances
Open Document