1. Understand the difference between accounting and finance for small businesses.
2. Understand the major activities of finance. 3. Understand how finance can affect the selection of a business
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form. 4. Understand the various sources that can be used to finance the
start-up operations of a business. 5. Understand what factors might affect the extent to which a
firm is financed by either debt or equity.
Discusses the critical importance of a small business
owner understanding the fundamentals of accounting—“the language of business.” This chapter
examines finance and argues that the small business owner should acquire a basic
understanding of some key principles in this discipline. One question that might come to
someone’s mind immediately is as follows: “What is the difference between accounting and
finance?” As an academic discipline, finance began in the early decades of the twentieth century.
We have already seen that accounting predates the formal study of finance by millennia.  Yet
some have argued that accounting should be seen as a subset of finance.  Others have argued
that both accounting and finance should be seen as subdisciplines of economics. Not
surprisingly, others have argued in favor of the primacy of accounting. If we get beyond this
debate, we can see that accounting is involved with the precise reporting of the financial position
of a firm through the financial statements,