What is Financial Accounting?
Financial accounting is the process of preparing financial statements, which uses companies to show financial performance and status for people outside the company, in which investors, creditors, suppliers and customers are included.
This is one of the most important aspects of managerial accounting, on the contrary, involving detailed reporting and forecasting for managers within the company.
Financial Statements
Most companies put together quarterly and annual financial statements, which they make available to shareholders and investors. There are four basic financial statements used in the corporate world to show the company's financial performance:
1. Income details (also known as profit and loss statement) cover a specific period (like a quarter or a year)
On Income Statement, Revenue - Expenditure = Net Income
According to generally accepted Accounting Principals (GAAP), the revenue is always recorded in the period of sales of goods and services, which can not be the same period actually received.
2. Balance Sheet is the statement of assets and liabilities at the end of an accounting period. In other words, the balance sheet is a financial snapshot at a specific time.
On Balance Sheet, Assets = Liabilities + Stockholder Equity
Shareholders' equity is the amount of financing provided by the operating (earnings not distributed to shareholders) and recycled by the shareholders through the contributed capital.
3. The statement of cash flow, as opposed to net income on the income statement, which is a non-cash number, shows the actual flow of cash inside and outside the company during a specific period.
The details of cash flow show cash flow from operating activities, investment activities and financial activities.
4. The statement of retained income reflects the specific time limit and it shows that the earnings paid by the earners to the shareholders and the income kept by the company
Notes of financial statements provide additional information about the financial position of a company, three types of notes, giving details of the accounting rules used to create the details, more information about an item on the financial statements. Give, and provide more information about one item on the statements.
Financial Accounting Standards
Financial statements should be in line with accounting standards and legal requirements. U.S. In, the Financial Accounting Standards Board (FASB) establishes financial accounting and reporting standards (generally acceptable accounting principles, or GAAP). Publicly traded companies should also comply with the requirements of securities and exchange commission.
The International Accounting Standards Board (IASB) works to develop internationally accepted financial reporting standards. There are differences in FASB and IASB standards in some areas, and a movement is going on to align standards to make Accounting easier in borders in the global commerce world.
Financial accounting is the process of preparing financial statements, which uses companies to show financial performance and status for people outside the company, in which investors, creditors, suppliers and customers are included.
This is one of the most important aspects of managerial accounting, on the contrary, involving detailed reporting and forecasting for managers within the company.
Financial Statements
Most companies put together quarterly and annual financial statements, which they make available to shareholders and investors. There are four basic financial statements used in the corporate world to show the company's financial performance:
1. Income details (also known as profit and loss statement) cover a specific period (like a quarter or a year)
On Income Statement, Revenue - Expenditure = Net Income
According to generally accepted Accounting Principals (GAAP), the revenue is always recorded in the period of sales of goods and services, which can not be the same period actually received.
2. Balance Sheet is the statement of assets and liabilities at the end of an accounting period. In other words, the balance sheet is a financial snapshot at a specific time.
On Balance Sheet, Assets = Liabilities + Stockholder Equity
Shareholders' equity is the amount of financing provided by the operating (earnings not distributed to shareholders) and recycled by the shareholders through the contributed capital.
3. The statement of cash flow, as opposed to net income on the income statement, which is a non-cash number, shows the actual flow of cash inside and outside the company during a specific period.
The details of cash flow show cash flow from operating activities, investment activities and financial activities.
4. The statement of retained income reflects the specific time limit and it shows that the earnings paid by the earners to the shareholders and the income kept by the company
Notes of financial statements provide additional information about the financial position of a company, three types of notes, giving details of the accounting rules used to create the details, more information about an item on the financial statements. Give, and provide more information about one item on the statements.
Financial Accounting Standards
Financial statements should be in line with accounting standards and legal requirements. U.S. In, the Financial Accounting Standards Board (FASB) establishes financial accounting and reporting standards (generally acceptable accounting principles, or GAAP). Publicly traded companies should also comply with the requirements of securities and exchange commission.
The International Accounting Standards Board (IASB) works to develop internationally accepted financial reporting standards. There are differences in FASB and IASB standards in some areas, and a movement is going on to align standards to make Accounting easier in borders in the global commerce world.
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