Finance

KidSam Blogging

Finance is the word that determines the adjustment of the funds. One can get funds from creditors like banks, lenders etc. And also from the investors and owners. The business can be financed by both Capital nd by the Assets.

Capital

Capital is the fund that is introduced by the owners or partners of the business. They first introduce funds in the form of cash and loans. The capital is further divided into 2 types.

A. Long term Capital

It is the loans and borrowings that is taken to run the business for a long time period. This period is more than 12 months. Sometimes we see that a short portion of the business profits and reserves are also used as long term capital. So that the business can expand.

B. Short term Capital

It is the capital that is introduced to the business for its running. But this is for a short term period i.e less than 12 months. It includes short term loans and borrowings.

Assets

It is the land and buildings and short term assets that helps the business. But it has some depreciation as it is used to run the business. 

A. Fixed Assets

These are the assets that are used for a longer time period. For example Land, Building, Reputation etc. But these has some depreciation expect Reputation as it's an non monetary property. 

B. Short term Assets

These assets are used by the business for less than 12 months. These assets are also some depreciation. Pen, Raw materials, Cash in bank etc. 

P&L Account

It the the profits and losses are made by the business are recorded. Here the profit will be distributed to its partners and a small part of it is reserved for the expansion of the business.