Role of Finance in Economic Development

Finance plays a vital role in Economic Development. It is a broad subject and has many aspects attached to it. Financial topics include managerial finance, balance sheet analysis, capital budgeting, etc. Finance Assignment Help Online explains the various role of finance in economic development. Some of the rules of finance in economic development are discussed below: -

·         Growth of Capital Market- Two types of capital is required for any business- fixed capital and working capital. As the name suggests, fixed capital is used to invest in fixed assets (plant, infrastructure, and machinery). While the working capital is used to run the day-to-day activities of the business. The main use of working capital is to purchase raw materials and convert them into finished products.

·         Development of Trade- Finance or the financial system is the basis of promotion of both domestic and foreign trade. In the financial system, there is no interaction between the seller and the buyer. All the documents related to trade are negotiated through the bank.

·         Economic Integration- There is a vital role in the financial system in promoting economic integration. And all those countries should have common economic policies, such as common trade, investment, commerce, transport coordination, employment legislation, old age pension, etc.

·         Employment Growth- the presence of the financial system in a country will give rise to more employment opportunities. The money market of the financial system provides working capital to business owners and manufacturers. Employment is also generated by various financial services like merchant banking, factoring, leasing, etc.

Role of Accounting in National Development:

Accounting plays a crucial role in national development. It also involves other related disciplines such as financial management, cost, and management accounting, budgetary control taxation and auditing. It is not only used for decision making, but also for taxation, capital formation, economic planning, and accountability. Accounting is a vast subject and has many disciplines related to it. Accounting Homework Helper explains the various role of accounting in national and economic development. Some of the rules of accounting in national development are discussed below: -

·         Cost Savings- For an economy to grow and develop, the additional costs must be minimized. Cost and management accounting works, as the most powerful tool that helps the accountants to guide the management. One of the main roles of accountants is to give management the best advice on cost saving.

·         Preparation of Budget- Accounting plays a crucial role in the preparation of the national budget and national income. Without accounting, it would not be easy to keep a track on productive activities going on in an economy. It sets a target for the optimal utilization of the resources.

·         Preparation of Financial Statements- Financial statement is the statement prepared by the accountants which include all the business activities. Business owners can monitor the business activities by referring to the financial statements of the company.   

·         Fraud Fighting- Accounting helps to monitor the activities of fraudsters. 

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