Accounting in finance is a distinct form of accounting procedure that aids in tracking the financial records of the company. With the help of certain standard principles, all the transactions are collected and recorded in the form of a financial statement. Balance sheet and income statement are examples of a financial statement.
Purpose of preparing financial reports of a company
Financial statements of a company are regularly issued to the outside people with the help of financial advisor. The people who receive them primarily are stockholders or owners and some investors. If the stocks of a company are publicized, the information regarding the financial statements of that company will be accessed by its competitors, employees, investment analysts, customers and labor organizations. The value of the company is not reported through financial accounting. But, accounting will offer sufficient information for the people to estimate the value of the company by themselves. You can try this website to understand what financial advisor in Mackay is.
The financial statements of a company are made public andare accessed by many people in a variety of ways. Therefore, financial accountants follow certain regulations called standards of accounting and generally accepted accounting principles or GAAP to prepare those statements. In the United States, FASB or the board of financial accounting standards will develop the relevant rules and regulations. The public trading of the company stocks must comply with the requirements of an agency of the United States government called security and exchange commission. Take time to read this page about financial accountant.
Accounting principles in brief
The accounting standards of financial accountants will be beneficial to the company to prepare its reports that are trustworthy, easily explicable, and that can be compared easily with that of the other companies.
GAAP is set with the help of certain basic principles like economic entity, reliability, cost principle, full disclosure, matching principle, relevance, and conservatism.
GAAP comprises of certain complex standard principles that are made in response to certain business transactions.
The accounting techniques and practices that were particular to an organization or a utility or insurance or banking are addressed by GAAP. These practices are resulted from the alterations in the industry regulations made by the government.
Peculiar pronouncements released by FASB are included in GAAP. FASB conducts research on the current financial needs and brings up latest amendments to the accounting rules to satisfy the current needs.
Financial accounting will help in creating external and general purpose financial statements. These statements include the statement of cash flow, balance sheet, income statement and statement of equity of stockholders. The profits of a company at a specific period are reported by the income statement. The balance sheet is represented by the assets, stockholders’ equity and liabilities for a specific date. The statement of cash flow represents the financial activities, operating activities, and investing activities. Stockholders’ statement indicates the change in the stockholders’ equity made for the period for which income and cash flow statements were made.