financial accounting

Examples of financial accounting in the following topics:

• Financial Accounting

  • Financial accounting is a core organizational function in which accountants prepare a variety of documents to inform stakeholders of the financial health of operations.
  • These financial statements are consistent with accounting guidelines and formatting, particularly for publicly traded organizations.
  • Generally speaking, it is expected by financial accounting standards that an organization maintain the following qualities when submitting financial accounting information:
  • This is the role of financial accountants.
  • List the various expectations of a financial accounting statement, along with the three common statements produced

• Managerial Accounting

  • When looking at traditional financial accounting, managerial accounting differs in a few key ways:
  • Financial accounting is generally historical, while managerial accounting is about forecasting.
  • Managerial accounting tends to lean a bit more on abstraction, utilizing various models to support financial decisions.
  • While financial accounting fits the mold expected by stakeholders, managerial accounting is flexible and strives to meet the needs of management exclusively.
  • Financial accounting looks at the company holistically, while financial accounting can zoom in at various levels (i.e. product level, division level, etc.)

• Why an accounting system is important

  • The term they use to describe these two perspectives is financial accounting and managerial accounting.
  • "Financial accountancy (or financial accounting) is the field of accountancy concerned with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, employees, government agencies, owners, and other stakeholders.
  • "Financial accountancy is governed by both local and international accounting standards".
  • In addition, financial accounting records and financial statements are essential sources of information for the preparation of tax returns.
  • Also, note that financial accounting reports must be prepared in accordance with national and international accounting standards.

• Consumers of Accounting Information

  • This development resulted in a split of accounting systems for internal (i.e., management accounting) and external (i.e., financial accounting) purposes and, subsequently, also in accounting and disclosure regulations and a growing need for independent attestation of external accounts by auditors.
  • Today, accounting is called "the language of business" because it is the vehicle for reporting financial information about a business entity to many different groups of people.
  • Accounting that provides information to people outside the business entity is called "financial accounting" and provides information to present and potential shareholders and creditors, such as banks or vendors, financial analysts, economists, and government agencies.
  • Because these users have different needs, the presentation of financial accounts is very structured and subject to many more rules than management accounting.
  • The body of rules that governs financial accounting in a given jurisdiction is the Generally Accepted Accounting Principles, or GAAP.

• Tax Accounting

  • Tax accounting couples legal obligations with financial accounting to ensure adherence to current tax laws.
  • In short, every region has specific tax accounting rules and regulations.
  • Tax accounting is therefore a combination of legal and financial knowledge.
  • Tax accountants act as the bridge between an organization's accounting team and the reporting bodies in the region.
  • This image demonstrates the various responsibilities and perspectives of different forms of accounting (those being tax accounting, managerial accounting and financial accounting).

• Usage of Accounting Information

  • Early accounts served mainly to assist a businessperson in recalling financial transactions.
  • This development resulted in the division of accounting systems for internal (i.e. management accounting) and external (i.e. financial accounting) purposes.
  • Accounting that provides information to people outside the business entity is called financial accounting.
  • The body of rules that governs financial accounting is called Generally Accepted Accounting Principles, or GAAP.
  • The International Financial Reporting Standards, or IFRS, provides another set of accounting rules.

• Introduction

  • learn to set up a chart of accounts for your organization
  • In this chapter, we will discuss the principles of accounting as well as some of the options you have for designing and installing an accounting system for your business.
  • There are many computer-based accounting systems available now, for relatively low cost, that make it easier for an entrepreneur to use software on a PC or the Internet to run an accounting system.
  • Although it is possible to keep essential accounting records manually, or perhaps on a series of spreadsheets, you will find that it is much easier and more reliable to simply use accounting software from the beginning.
  • You may need the advice of an accounting professional to work with you in setting up your accounting records and helping you select and implement a suitable accounting package.

• Financial Statements Across Periods

  • Corporations report financial statements following Generally Accepted Accounting Principles (GAAP).
  • The rules about how financial statements should be put together are set by the Financial Accounting Standards Board (FASB).
  • These three financial statements are:
  • The income statement (also called the "profit and loss statement"): This gives an account of what the company sold and spent in the year.
  • This is necessary because accounting sometimes deals with revenues and expenses which are not real cash, such as accounts receivable and accounts payable.

• Double-Entry Bookkeeping

  • A double-entry bookkeeping system is a set of rules for recording financial information in a financial accounting system in which every transaction or event changes at least two different nominal ledger accounts.
  • In the double-entry accounting system, each accounting entry records related pairs of financial transactions for asset, liability, income, expense, or capital accounts.
  • The rules for formulating accounting entries are known as "Golden Rules of Accounting".
  • The accounting entries are recorded in the "Books of Accounts".
  • Real accounts are assets.

• The Role of Financial Managers

  • Financial managers ensure the financial health of an organization through investment activities and long-term financing strategies.
  • Financial managers are responsible for the financial health of an organization.
  • Financial managers typically:
  • Often, controllers oversee the accounting, audit, and budget departments.
  • They set credit-rating criteria, determine credit ceilings, and monitor the collections of past-due accounts.