Chapter 16: The financial cycle. In this chapter, you will learn: To learn about the financial cycle business activities. to learn how to flow chart the financial cycle business activities, to understand the processing of financial cycle transactions using a computer, to know about the various mandatory financial reports. to learn about the control practices and procedures in the financial cycle. | The financial cycle Learning objectives To learn about the financial cycle business activities. To learn how to flow chart the financial cycle business activities. To understand the processing of financial cycle transactions using a computer. To know about the various mandatory financial reports. To learn about the control practices and procedures in the financial cycle. key terms asset register debenture ordinary shares preference shares register of debentures retained earnings shareholders’ register statement of cash flows statement of financial performance statement of financial position Financial cycle business activities The functions of the financial cycle are: raising capital by investments from owners raising capital by loans from creditors recording capital-raising transactions in the general ledger acquiring productive assets using capital and recording the acquisition maintenance of assets recording various maintenance transactions summarising accounting data Financial cycle business activities The functions of the financial cycle are grouped into three broad categories: Raising capital Acquiring and maintaining assets Financial reporting Financial cycle business activities Raising capital Shares incorporated companies raise capital by asking the public to apply for shares (ordinary or preference) Debentures borrowings secured by a charge over the assets of the borrowing organisation Retained earnings profits retained for future business use Raising capital Long-term loans loans from banking or other financing institutions Other sources of capital include: trade creditors factoring of debtors bank loans Acquiring and maintaining assets Capital raised is invested in fixed assets Fixed assets are used to expand business operations or replace expended assets Maintenance of fixed assets is recognised as a cost of business operations Financial reporting Used to make accounting entries and period-end adjustments, and produce financial reports or statements . | The financial cycle Learning objectives To learn about the financial cycle business activities. To learn how to flow chart the financial cycle business activities. To understand the processing of financial cycle transactions using a computer. To know about the various mandatory financial reports. To learn about the control practices and procedures in the financial cycle. key terms asset register debenture ordinary shares preference shares register of debentures retained earnings shareholders’ register statement of cash flows statement of financial performance statement of financial position Financial cycle business activities The functions of the financial cycle are: raising capital by investments from owners raising capital by loans from creditors recording capital-raising transactions in the general ledger acquiring productive assets using capital and recording the acquisition maintenance of assets recording various maintenance transactions summarising accounting data Financial .
