2.

1 Indentify and briefly discussed the costs of the different source of finance Factoring: This is allowed for the company which is selling credit by factors. Factors give the businesses cash in advance (often up to 80% of the value of the debt) whether the debt is unsecured. They also supply the debtor management service that control and collect the debt from business debtors if business pay fees for them. Bank Loans: A loan is for a fixed amount with a fixed repayment schedule and may appear on a balance sheet with a specific name telling the reader exactly what the loan is and its main details. If an enterprise does not generate enough cash from operating, it will need to borrow funds in accordance with its cash budget. Bank loans are less flexible than an overdraft and it is for a set period of time. Rate of interest is lower than an overdraft and secured against the companys assets.

Share Capital: Share capital is the Funds raised by issuing shares in return for cash or other considerations. The amount of share capital a company has can change over time because each time a business sells new shares to the public in exchange for cash, the amount of share capital will increase. Share capital can be composed of both common and preferred shares. Each share carrying a vote in the management of the business, managerial control may be limited. Overdraft: This source is suitable to business that needs capital to solve the small capital problems, such as cash flow, but they dont need long-term loan. In this case, they can arrange with bank to issue overdraft with lower interest. The interest is based on daily basis. Credit card: Credit card is a very convenient option to make payments for goods and services that company may require on a day to day basis. Most service providers will not charge anything extra just because paid by credit card and not in cash. What's more the credit card company will give a free credit period after which have to pay off the full amount.

2.2 Importance of financial planning: It is important to plan finances in order to reap long term benefits through the assets in hand. The investments that one makes are structured properly and managed by professionals through financial planning. Every decision regarding our finances can be monitored if a proper plan is devised in advance. The following points explain why financial planning is important. Cash Flow: Financial planning helps in increasing cash flow as well as monitoring the spending pattern. The cash flow is increased by undertaking measures such as tax planning, prudent spending and careful budgeting. Capital: A strong capital base can be built with the help of efficient financial planning. Thus, one can think about investments and thereby improve his financial position. Income: It is possible to manage income effectively through planning. Managing income helps in segregating it into tax payments, other monthly expenditures and savings. Family Security: Financial planning is necessary from the point of view of family security. The various policies available in the market serve the purpose of financially securing the family. Investment: A proper financial plan that considers the income and expenditure of a person, helps in choosing the right investment policy. It enables the person to reach the set goals. Standard of Living: The savings created by through planning c ome to the rescue in difficult times. Death of the bread winner in a family, affects the standard of living to a great extent. A proper financial plan acts as a guard in such situations and enables the family to survive hard times. Financial Understanding: The financial planning process helps gain an understanding about the current financial position. Adjustments in an investment

plan or evaluating a retirement scheme becomes easy for an individual with financial understanding.

I have worked in an insurance company that didnt have suitable financial planning they will get failure and may lead to bankruptcy. The common failure is overtrading when company do too much things in short-time but they dont care about the capital and liability, they only concentrate on increasing sale volume. It may result in shortage of cash. The other failure is having much money but dont have financial planning with it so the opportunities cost is concerned. 2.3 Information need of this specific information Shareholders: Shareholders are important figures in the financing, operation, governance and control aspects of business. They are part the owners, who invest into the company in order to get assets, and putting this money into a successful business allows the company to grow. They are the most important supporter the company has, thats why it is necessary to build a good relationship between them and the organization. Seeing striving financial information and positive decision making is they key way to get shareholders interested. A well run company has shown on an online website how they maintain a good dialogue with shareholders through proactively organizing meetings and

presentations as well as responding to wide range of enquires and giving the option to them to receive a full Annual Report and Financial Statements. Bank: Bank is committed to be a sophisticated prominent and professional institution, providing one window service to its customers. The Bank visualizes itself as a full service institution dedicated to the specialized needs of its niche markets. Bank's activities primarily cover the provision of a full range of banking services to the commercial middle market segments of the country, with increasing emphasis in

future on the growth of the consumer finance, agriculture and small and medium enterprise sectors. Bank's operating strategy is focused on continuous implement of the internal procedures and operating systems top of its operations. Provide better services to its customers while ensuring effective control on the quality. Inland Revenue: The Inland Revenue is this agency responsible for the collection of taxes and duties, excluding Custom Duties, Stamp Duties and Transfer Taxes. The Inland Revenue Department provides a number of key services such as Licensing, Taxpayer Registration (TRN), General Consumption Tax Registration, Tax Compliance Certification and Taxpayer Assistance. Suppliers: Good purchasing practices are integral to small business success, and few factors are as vital in ensuring sound purchasing methodologies as the selection of quality suppliers. Product quality is regarded as an essential factor in selecting a supplier. Specifics in this realm include the suppliers' statistical process control methods, its QS-9000 registration, its approaches to problem solving and preventive

maintenance, and its methods of equipment calibration. Employees: Employees are essential to a well-functioning business and to provide quality service to consumers. It is important for the business to care for their staff, making sure that they are happy with working conditions etc. and this is right up there with the importance of financial matters, because customer service is another key to returning customers, and if there is not a happy worker then there wont be good customer service. The productivity of any organization depends on the satisfaction of the employees, as happier employees also make more profit as they work faster and harder.

2.4 A catering companys ledger account, trial balance income statement and balance sheet General Ledger Dr Balance c/d1000 --------1000 Dr Cash700 ---------700 Dr Creditor4500 ---------4500 Furniture Account Balance c/d4500 -----------4500 Rent account Balance c/d- 700 ------------700 Cr Capital account Cash1000 --------1000 Cr Cr

Dr Cash-

Advertisement account 150 ---------------150 Balance c/d150 ----------------150

Cr

Dr Payable to RHDBankPayable to RHD-

Supplier account 1000 500 900 ------------2400 Payable to suppliersBalance c/d-

Cr 750 1650 -----------2400

Dr Cash25

Water account Balance c/d25 -------------25

Cr

------------25 Dr Supplier750 -------------750 Dr CashCashBalance c/d500 500 900 1400 Debtor account 750 2000 --------2750 RHD creditor account Supplier account

Cr Balance c/d- 750 ------------750 Cr Supplier- 1000 Supplier- 900 -----1400 Cr Bank-1000 Cash- 450 Balance c/d- 1300 2750

Dr CateringBalance c/d-

Susan Horn Catering Company Adjusted Trial Balance Jan 30,2013 Debit Cash 1000 Rent kitchen space 700 Furniture and equipment 4500 suppliers 1000 advertising 150 Catering and event 750 suppliers 500 stationary 50 Cash received 1000 suppliers 900 Cash received 1500

Credit

RHD Catering and event Cash received Council tax Gas & Elec Water RHD Check received Total Income statement: Dr Particulars RentAdvertisingStationaryCouncil taxGasWater700 150 50 100 175 25

500 2000 450 100 175 25 500 1000 8400

8400

Cr Particulars Catering5700

Balance statement: Dr Particulars CapitalRHD suppliersCreditors1000 900 4500 Cash in handCash at bankDebtorFurnitureSuppliersSuppliers-

Cr Particulars 1800 450 1300 4500 1650 750

References: Financial Management, Business Process http://www.cgi.com/web/en/library/solutions/governments/74073.htm 28Feb,2013] Olga,P. (2008). Accounting information System: Power Instrument For Company Group Advanced Management.(2)p.1. [Accessed

James A. Hall. (2008). Accounting Information Systems. Sixth Edition. Cengage Learning Academic Resource Center: Rob Dewey. Rising Tide Economics Research Reports, American Institute for Economics Research June14,1999 p.61-62