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Financial accounting involves recording, classifying, and summarizing a company's financial transactions to produce financial statements for external users. It provides information to stakeholders like investors, creditors, and regulators. Financial statements present key financial data such as revenues, expenses, assets, liabilities, and equity. The objective of financial accounting is to systematically record transactions, ascertain the financial results and position of a business, and provide useful information to users for decision making. It follows accounting standards like GAAP to ensure financial reports are credible, understandable, and comparable.

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Shella Amiri
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16 views

Title For Discuss

Financial accounting involves recording, classifying, and summarizing a company's financial transactions to produce financial statements for external users. It provides information to stakeholders like investors, creditors, and regulators. Financial statements present key financial data such as revenues, expenses, assets, liabilities, and equity. The objective of financial accounting is to systematically record transactions, ascertain the financial results and position of a business, and provide useful information to users for decision making. It follows accounting standards like GAAP to ensure financial reports are credible, understandable, and comparable.

Uploaded by

Shella Amiri
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© © All Rights Reserved
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Title for discuss :the financial

accounting system.
2/8/2021
Name: shella “amirzad”
Father/n :alef beg
Session: bba 7 semester
Id: k1f17bba0077
In the name of god
Interdiction:
Definition of financial accounting system :
 FAS is an accounting system where the financial data of the
organization is maintained.
Financial data contains any transaction which debits or credits the
account balance.
The financial accounting system must be defined in billing
and solution application.
Financial accounting is the field of accounting concerned with the
summary ,analysis and reporting of financial transactions related to a
business.
This involves the preparation of financial statement available for public
use.
Stockholders, suppliers ,banks, employees, government agencies,
business owner, and other stakeholders are example of people
interested in receiving such information for decision making purpose .
Financial accountancy is governed by both local and international
accounting standards.
generally accepted accounting principle (GAAP) is the standard
framework of guidelines for financial accounting used in any given
jurisdiction.
It includes the standards , conventions and rules that accountants
follow in recording and summarizing and in the preparation of financial
statements.
Recording and summarizing and in the preparation of financial
statements.
On the other hands ,international financial reporting standards (IFRS) is
a set of passionable accounting standard stating how particular types
of transactions and other events should be reported in financial
statement.
While financial accounting is used to prepare accounting information
for people outside the organization or not involved in the day to day
running of the company ,managerial accounting provides accounting
information to help the company , managers make decisions to manage
the business.
How financial accounting works
Financial accounting utilizes a series of established accounting
principle . the selection of accounting principles to use during the
course of financial accounting depends on the regulatory and
reporting requirements the business face . for U.S. public
companies ,businesses are required to perform financial accounting
in accordance with generally accepted accounting principle
(GAAP) .The establishment of these accounting principle is to
provide consistent information to investors ,creditors, regulators,
and tax authorities.

The financial statement used in financial accounting present the five


main classifications of financial data: revenues ,expenses ,assets,
liabilities ,and quality .

Financial accounting results in the determination of net income at


the bottom of the income statement .
Assets ,liabilities and equity accounts are reported on the balance
sheet.
The balance sheet utilizes financial accounting to report
ownership of the company’s future economic benefits.

Accounting principles
If financial accounting is going to be useful , a company’s reports
need to be credible ,easy to understand, and comparable to those of
other companies .
to this end , financial accounting follows a set of common rules
known as accounting standards or(GAAP).
GAAP is based on some basic underlying principles and concepts
such as the cost principle , matching principle ,full disclosure ,going
concern, economic entity ,conservatism, relevance ,and reliability .

GAAP includes many specific pronouncement as issued by the


financial accounting standard board (FASB) .
THE (FASB) is a non government group that research current needs
and develops accounting rules to meet those needs .

Objective of financial accounting

o Systematic recording of transactions: basic objective of


accounting is to systematically record the financial aspects of
business transactions (i.e book- keeping ).these recorded
transactions are later on classified and summarized logically for
the preparation of financial statements and for their analysis
and interpretation .
o Ascertainment of result of above recorded transaction:
accountant prepares profit and loss account to know the result
of business operations for a particular period of time. If
expenses exceed revenue then it is said that the business is
running under loss. The profit and loss account helps the
management and different stakeholders in taking rational
decisions. For example ,if business is not proved to be
remunerative or profitable ,the cause of such a state of affairs
can be investigated by the management for taking remedial
steps.

o Ascertainment of the financial position of business:


businesswoman is not only interested in knowing that result of
the business in terms of profits or loss for a particular period
but is also anxious to know that what he owes (liability) to the
outsiders and what he owns (assets) on a certain date. To know
this, accountant prepares a financial position statement of
assets and liabilities of the business at a particular point of time
and helps in ascertaining financial health the business.

o Providing information to the users for rational


decision –making :accounting as a ‘language of business’
communicates the financial result of an enterprise to various
stakeholders by means of financial statements. accounting
Aims to meet the financial information needs of the decision
makers and helps them in rational decision making .
o To know the solvency position: by preparing the balance
sheet, management not only reveals what is owned and owed

by the enterprise ,but also it gives the information regarding


concern’s ability to meet its liabilities in the short run and also
in the long run as and when they fall due .

respectfully: your student shella amirzad.

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