The company’s business transactions, recording, summarizing, and reporting process through financial statements are called financial accounting. Where all these statements have different names like income statement, balance sheet, cash flow statement, retained earnings statement.
It is also to be noted here that financial accounting is a way through the help of which businesses keep an eye on their operations. Financial accounting also helps in providing a glimpse of what is the current financial health of the business. Financial accounting also helps in decision-making as it provides balance sheets and income statements.
Importance of Financial Accounting
Financial accounting is essential because it is required by law. Financial statements like balance sheets and cash flow statements are most important for registered companies. These statements are involved in the annual report of the company.
The statement of financial accounting is circulated externally that is often referenced by the individuals both inside and outside a company that includes management, investors, auditors, lawyers, suppliers, banks.
- Management statements allow the management of a company to solve many problems and to predict the future.
- To decide whether the business is attractive enough to invest to see the numbers by investors.
- Government auditors are going to initiate the analysis with the statements if the company is subject to an IRS audit.
- Lawyers need to be able to analyze this information if there is a lawsuit or other legal action that is related to a company’s income or expenses.
- The company’s financial statements need information from the suppliers before giving the goods or services to make sure that they will be able to give the invoice payment.
- The bank may request specific financial information if a company wants a loan. Companies have the allowance to display that they need to give the loan back and on-time.
Do you know the difference between accounting and financial accounting?
Firstly, financial accounting is related to the generation of reports and data, which is particularly based on accurate information and follows the GAAP. GAAP is established by the United States for covering a wide array of topics, including financial statement presentation.
On the other hand, accounting encloses all the financial transactions of the company. An accounting department that is well handled will have set policies and procedures for expenses, data management, and the generation of financial reports.
And, if in case you have any confusion or any question that you want to know, then; go for financial accounting assignment help, which will also help in completing your financial accounting homework.
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