financial accounting

Examples of financial accounting in the following topics:

• Objectives of Accounting

  • The Financial Accounting Standards Boards Statements of Financial Accounting Concepts No. 1 states the objective of business financial reporting, which is to provide information that is useful for making business and economic decisions.
  • With these objectives in mind, financial accountants produce financial statements based on the accounting standards in a given jurisdiction.
  • Generally Accepted Accounting Principles refer to the standard framework of guidelines for financial accounting used in any given jurisdiction; generally known as accounting standards or Standard accounting practice.
  • These include the standards, conventions, and rules that accountants follow in recording and summarizing, and in the preparation of financial statements.
  • Describe the objectives of accounting, distinguishing between Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS)

• The Role of Accounting in the Business

  • The role of accounting in business is to help internal and external stakeholders make better business decisions by providing them with financial information.
  • In fact, the purpose of accounting is to help stakeholders make better business decisions by providing them with financial information.
  • Financial accountants furnish information to individuals and groups both inside and outside the organization in order to help them assess its financial performance.
  • In other words, management accounting helps you keep your business running while financial accounting tells you how well you’re running it.
  • Financial accounting furnishes information to individuals and groups both inside and outside the organization to help them assess the firm’s financial performance.

• Fundamental Concepts in Accounting

  • In order to prepare the financial statements, it is important to adhere to certain fundamental accounting concepts.
  • Financial statements are prepared according to agreed upon guidelines.
  • The objectives of financial reporting, as discussed in the Financial Accounting standards Board (FASB) Statement of Financial Accounting Concepts No. 1, are to provide information that
  • In order to prepare the financial statements, it is important to adhere to certain fundamental accounting concepts.
  • This is a diagram of details for principles, concepts, and constraints within the field of Financial Accounting.

• Introduction to GAAP

  • Generally Accepted Accounting Principles (GAAP) is the standard framework for financial accounting used in any given jurisdiction.
  • Generally Accepted Accounting Principles (GAAP) refer to the standard framework of guidelines for financial accounting used in any given jurisdiction; generally known as accounting standards.
  • GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing accounting transactions, and in the preparation of financial statements.
  • In 1973, the Accounting Principles Board was replaced by the FASB under the supervision of the Financial Accounting Foundation with the Financial Accounting Standards Advisory Council serving to advise and provide input on the accounting standards.
  • Objectivity principle: the company financial statements provided by the accountants should be based on objective evidence.

• What Goes on the Balances Sheet and What Goes in the Notes

  • In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership, a corporation, or other business organization, such as an LLC or an LLP.
  • All liabilities are typically placed on the same side of the report page as the owner's equity because both those accounts have credit balances (asset accounts, on the other hand, have debit balances).
  • The balances in these accounts are typically due in the current accounting period or within one year.
  • Accounting principles can sometimes require the disclosure of specific information for the benefit of the financial statement user.
  • If an error is found on a previous year's financial statement, a correction must be made and the financials reissued.

• Outputs of Accounting

  • Accounting outputs are financial statements that detail the financial activities of a business, person, or other entity.
  • A financial statement, or financial report, is a formal record of the financial activities of a business, person, or other entity.
  • For a business enterprise, relevant financial information presented in a structured manner is called a financial statement.
  • Notes to financial statements are considered an integral part of the financial statements.
  • Financial statements are intended to be understandable by readers who have a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently.

• Financial Statement Notes

  • So, additional supporting financial data is added in the Financial Statement Notes section. .
  • Notes to financial statements are added to the end of financial statements.
  • Notes to financial statements can include information and supporting data on debt, going concern criteria, accounts, contingent liabilities, or contextual information explaining the financial numbers (for example, if the company is facing a lawsuit).
  • Notes can also explain the accounting methods used to prepare the statements.
  • The notes support valuations for how particular accounts have been computed.

• Expense Recognition

  • Expense recognition is an essential element in accounting because it helps define how profitable a business is in an accounting period.
  • In terms of the accounting equation, expenses reduce owners' equity.
  • When a business recognizes an expenditure, it records the amount in its financial records.
  • Generally, cash basis accounting is reserved for tax accounting, not for financial reports.
  • Most financial reporting in the US is based on accrual basis accounting.

• Inputs to Accounting

  • Journal entries are an easier means for perpetrating financial statement fraud than adjusting the subledgers.
  • Bookkeeping is the recording of financial transactions.
  • The accountant creates reports from the recorded financial transactions recorded by the bookkeeper and files forms with government agencies.
  • A bookkeeper (or book-keeper), also known as an accounting clerk or accounting technician, is a person who records the day-to-day financial transactions of an organization.
  • General ledger is the backbone of any accounting system which holds financial and non-financial data for an organization.

• Managing to Prevent Fraud

  • This is when the services of a forensic accountant may be necessary.
  • Forensic accounting is the application of accounting methodology to legal issues.
  • Typical tools used in forensic accounting are bank records, personal financial statements, interviews, and credit reports.
  • One incentive, the opportunity to commit fraud, can be reduced when accounting functions are separated.
  • The act of segregating duties separates the record-keeping, authorization, and review functions in the accounting process.