financial accounting part 2

• The management of an organization performs three general broad function: Planning, directing and motivating, controlling
• Definition of a company by Zappa


  (1965) “The company is an economic institution destined to continue, which, for the satisfaction of human needs, orders and carries out production in continuous coordination”.
• The typical corporate behavioral model

  programming process - executive process - control - feedback
• For all companies to be effective and efficient it must have 3 levels of managers namely

  strategic management, tactical management and operational management
• The Direct costs are:

  Costs that can be easily and conveniently traced to a product or department
• The formula for break-even (point) analysis is:

  BEP = Fixed Costs / (Sales price Per Unit - Variable Cost Per Unit)
• Classification of management function according to H.Fayol:

  Management

  1. operation function (production, commercial, financial, accounting, security)
  2. directional function (planning, control, organisation, leadership)
• What is Partita Doppia

  The universal recording method is the double-entry system “Partita Doppia”.

  The double-entry system, known in Italian as “Partita Doppia” was born from the intuition of Luca Bartolomeo de Pacioli (or Paciolo), a friar of franciscan order.
• What is Accounting?

  Accounting is the process of systematically recording, measuring, and communicating information about financial transactions.
• Financial accounting has the following purposes:

  -knowing the business result (profit or loss)

  -identifying the financial position of the company (it is essential to know the extent of assets and liabilities at any point of time)

  -ensuring control over the assets

  -facilitating an appropriate cash management (use of surplus and overcoming of deficiency)

  -providing required information
• What is managerial accounting

  The process of identifying, measuring, analyzing, interpreting and communicating information in pursuit of an organization’s goals
• Main activities of managerial accounting

  -Providing information for decision making and planning

  -Assisting managers in directing and controlling operational activities

  -Motivating managers and other employees toward the organization’s goals

  -Measuring the performance of activities, subunits, managers and other employees within the organization

  -Assessing the organization’s competitive position and working with other managers to ensure the organization’s long-run competitiveness in its industry
• Steps of organizational process

  -Identify objectives

  -Identify functions to perform in order to achieve the objectives

  -Decomposition and composition of functions to create roles

  -Specification for each role of the tasks, responsibilities and powers to be assigned to people.
• What are assets

  Assets are a complex of coordinated items at the disposal of the company. Assets can be studied under two aspects:

  (a) qualitative aspect: quality and type of the assets that make up the patrimony;

  (b) quantitative aspect: it relates to the value of the assets.
• What is capital

  Capital is a static concept as it is always referred to a specific instant.
• What is management

  MANAGEMENT: is the system of simultaneous and subsequent operations carried out throughout the life of the company.
• The decision-making process consists of the following steps:

  -problem identification

  -problem definition

  -development of alternative solutions

  -identification of the consequences associated with each alternative

  -choice of the most convenient alternative
• Who is the economic man

  The economic man is the protagonist of decisions. The economic man:

  -is omniscient

  -is objectively rational

  -chooses the alternative that maximises its utility function
• Maslow's theory

  Human behavior can be viewed as a series of actions aimed at achieving goals that satisfy human needs. The process is continuous.

  When one need no longer motivates, another one arises.

  I want - I do - I achieve
• The scale of human needs

  снизу вверх:

  -Physiological needs

  -Security needs

  -Social needs

  -Self-esteem needs

  -Esteem needs of others

  -Self-realisation needs
• Why do companies exist?

  According to Coase, any production could be carried out by developing contracts with other individuals on the market.
• According to Capaldo's theory, productive factors can be of two types:

  -inputs in a contractual position: they are acquired by the company through a contract and have a remuneration:

  a)fixed

  b) certain

  c) priority

  d) defined by contract

  -inputs in residual position: they have a remuneration:

  a)potential

  b) variable

  c) subsequent
• How can be classified corporate subjects according to Onida's model

  economic subject and legal subject
• Definition of the legal subject

  He / She is the person or group of people or entity in whose name the business is carried on and to whom the rights and obligations, which arise from the establishment and operation of the business, are attributed.

  legal subject

  1. physical person (living being)
  2. legal person (an abstract entity created be force of law)

  Both have legal capacity

  The capacity to act is different
• What is legal capacity

  LEGAL CAPACITY: the capacity to hold rights (acquired at birth).
• What is the capacity to act

  CAPACITY TO ACT: ability to establish, modify, extinguish legal relationships (acquired at the age of 18).
• What is Public legal person

  Public entities
• What is Private legal person

  -Associations

  -Foundations

  -Commercial companies
• What is association

  ASSOCIATION: a group of people who come together to achieve private aims:

  -they are also called corporations;

  -the scheme of the constitutive act is standardised;

  -they are not-for-profit organisations.
• What is foundation

  FOUNDATION: interest-bearing assets which, by donation or by will, are permanently tied to the achievement of private non-profit purposes:

  -they are also called institutions;

  -the scheme of constitutive act is standardised;

  -they are not-for-profit organisations.
• What is the economic subject

  He / She is the person or group of people ("small coalition of people") who, in practice, holds the supreme volitional power in the company and determines the basic direction of company management.

  Particularly, the economic subject:

  -takes strategic decisions;

  -controls the functioning of the corporate system by imposing, through the use of authority and non-authoritarian influences, a hierarchy of objectives, decisions, bodies and command.
• What three exceptions of having control of the company

  -Control of the company with a capital share of less than 50%.

  -Control without direct investment of capital by forming a group of companies.

  -Control without direct or indirect investment of capital (the case of dominant influence under Article 2359 of the Civil Code).
• What is the contractual ties

  Contractual ties: the phenomenon is typical of relations between large companies and small satellite companies.
• According to the model of Mitchell, Agle and Wood, stakeholders can be classified according to


  power, urgency and legitimacy
• According to the shareholder value creation theory,...

  the enterprise creates value for the holders of risk capital, who have the right of control as they are remunerated residually
• According to the stakeholder value creation theory,...

  the company must balance the different needs of the company's stakeholders. This means that it has to assume greater social responsibility towards the relevant stakeholders (contingent approach)
• Development strategies leading to the creation of a group can be:

  -Vertical

  -Horizontal

  -Diversified

  -International
• What is the vertical development strategy

  Company X creates or buys companies that produce goods/services that are upstream or downstream of the operational activities carried out by company X.
• What is the horizontal development strategy

  Company X creates or buys companies that produce the same good.
• What is the diversified development strategy

  Company X moves into new sectors without technological or marketing connections (conglomerate development) or with technological or marketing connections (lateral development).