What Is the Relationship Between Corporate Finance and Accounting?

Corporate financial relationships refer to the economic relationships that occur with various parties during the organization of financial activities. The financing activities, investment activities, operating activities, profits and distribution activities of an enterprise have a wide range of relationships with the top, bottom, left and right sides of the enterprise. The financial relationship of an enterprise can be summarized as follows.

Corporate financial relations

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Corporate financial relationships refer to the economic relationships that occur with various parties during the organization of financial activities. The financing activities, investment activities, operating activities, profits and distribution activities of an enterprise have a wide range of relationships with the top, bottom, left and right sides of the enterprise. The financial relationship of an enterprise can be summarized as follows.

Chinese name

Corporate financial relations

Foreign name

Enterprise financial relationships

Object

enterprise

Subject

accounting

(1) Financial relationship between the enterprise and its owner

This mainly refers to the economic relationship formed by the owner of the enterprise investing funds into the enterprise, and the enterprise pays its owners investment returns. There are four main types of business owners: (1) state; (2) legal entity; (3) individual; (4) foreign business. The owner of an enterprise must perform its capital contribution obligations in accordance with the investment contract, agreement, and articles of association in order to form the company's capital in a timely manner. An enterprise uses capital to operate, and after achieving profits, it shall distribute profits to its owners in accordance with the capital contribution ratio or the provisions of the contract and articles of association. The financial relationship between an enterprise and its owners reflects the nature of ownership and the relationship between operating rights and ownership.

(2) Financial relationship between the enterprise and its creditors

This mainly refers to the economic relationship formed by companies borrowing funds from creditors and paying interest and returning principal on time according to the provisions of the loan contract. In addition to using capital for business activities, enterprises must also borrow a certain amount of funds in order to reduce the cost of capital and expand the scale of business operations. The creditors of an enterprise mainly include: (1) bondholders; (2) loan institutions; (3) commercial credit providers; (4) other units or individuals that lend funds to the enterprise. After using the creditor's funds, the enterprise shall pay the interest to the creditor in a timely manner at the agreed interest rate. When the debt is due, it shall reasonably arrange the funds and return the principal to the creditor on time. The relationship between an enterprise and its creditors reflects the relationship between debt and claims.

(3) The financial relationship between the enterprise and its invested company

This mainly refers to the economic relationship formed by an enterprise investing its idle funds in the form of stock purchase or direct investment in other enterprises. With the deepening of economic system reform and the development of horizontal economic cooperation, this relationship will become more extensive. An enterprise investing in other units shall perform its capital contribution obligations in accordance with the agreement and participate in the profit distribution of the invested unit. The relationship between the enterprise and the invested entity is the relationship between the investment and the capital which reflect the nature of ownership.

(4) The financial relationship between the enterprise and its debtor

This mainly refers to the economic relationship formed by enterprises lending their funds to other units in the form of purchasing bonds, providing loans or commercial credit. After an enterprise lends out funds, it has the right to require its debtor to pay interest and return principal in accordance with agreed terms. The relationship between an enterprise and its debtor reflects the relationship between claims and debts.

(V) Financial relations of various units within the enterprise

This mainly refers to the economic relationship formed by the units within an enterprise that provide products or services to each other in all aspects of production and operation. Under the conditions of the implementation of the internal economic accounting system, enterprises' supply, production and sales departments and production units should provide products and services to each other for valuation and settlement. This fund settlement relationship formed within the enterprise reflects the interest relationship between the various units within the enterprise.

(6) Financial relationship between the enterprise and employees

This mainly refers to the economic relationship formed in the process of paying labor compensation to employees. Enterprises should use their own product sales income to pay their employees wages, allowances, bonuses, etc., and pay their labor remuneration according to the quantity and quality of labor provided. This kind of financial relationship between enterprises and employees reflects the distribution of labor results between employees and enterprises.

(VII) Financial relations between enterprises and tax authorities

This mainly refers to the economic relationship formed between the state tax authorities and the taxation of enterprises in accordance with the provisions of the tax law. Any enterprise must pay various taxes in accordance with the provisions of the national tax law to ensure the realization of national fiscal revenue and meet the needs of all sectors of society. Prompt and full payment of taxes is the contribution of the enterprise to the country and the obligation of the society. Therefore, the relationship between enterprises and tax authorities reflects the rights and obligations of paying taxes according to law and taxing according to law.