Financial Accounting

Financial Accounting
(accounting-simplified.com)
Accounting 4. Performance - helps to

- The process of recording and determine how well a business is
summarizing financial performing
information in a useful way 5. Position - show financial position
of a business
Components of Accounting 6. Liquidity - determining how
1. Book-keeping much cash are at its disposal to
- Process of recording and pay for its financial commitments
summarizing financial 7. Financing - provide historic
information (financial financial record; securing finance
accounting) 8. Control - sufficient internal
- Involves the recording of controls for the safeguarding of
transactions (sales, purchases, its valuable resources
and expenses) 9. Accountability - promotes
2. Analysis accountability
- Management Accounting - 10. Legal - legal requirement;
provides information to financial rights and obligations
management for analysis, 11. Users - information needs
decision making, planning and
control of the business Users of Accounting Information
(managerial accounting) 1. Internal users of Accounting
(primary users)
Importance of Accounting
● Record ● Owners
● Legal ● Managers
● Performance ● Employees
● Planning and Control
● Decisions 2. External Users of Accounting
(secondary users)
Objectives of Accounting
1. Recording - record of all ● Investors
transactions ● Lenders
2. Planning - allocate their limited ● Suppliers
resources (budgeting) ● Customers
3. Decision - help managers in ● Tax Authorities
making a range of business ● Government
decisions and developing policies ● Auditors
to make the organizational ● Public
processes more efficient
of an organization’s activities on
its ecological and social
Types of Accounting environment
1. Financial Accounting - process of

producing information for Financial Statements
external use in the form of - represent a formal record of the
financial statements (reporting) financial activities of an entity.
- These are written reports that
GAAP (Generally Accepted Accounting quantify the financial strength,
Principles) - standard framework of performance and liquidity of a
guidance for financial accounting used company
in any given jurisdiction - reflect the financial effects of
2. Management Accounting - business transactions and events
provides information primarily on the entity
for internal use by the company’s
management (more detailed)
Types of Financial Statements
Cost Accounting - branch of 1. Statement of Financial Position
management accounting and involves - presents the financial
the application of various techniques to position of an entity at a
monitor and control costs (more suited given date (balance sheet)
to manufacturing concerns) ● Assets
● Liabilities
3. Governmental Accounting - also ● Equity
known as public or federal
accounting; refers to the type of 2. Income Statement
accounting information system - reports the company's
used in the private sector financial performance in
4. Tax Accounting - refers to terms of net profit or loss
accounting for the tax related over a specified period
matters (profit and loss statement)
5. Forensic Accounting - the use of ● Income
accounting, auditing and ● Expense
investigative techniques in cases
of litigation or disputes 3. Cash Flow Statement
6. Project Accounting - use of - presents the movement in
accounting system to track the cash and bank balances
financial progress of a project over a period
through frequent financial ● Operating Activities
reports ● Investing Activities
7. Social Accounting - refers to the ● Financing Activities
process of reporting implications
4. Statement of Changes in Equity
- details the movement in
owners' equity over a
period (statement of
retained earnings)
● Net profit or loss
● Share capital issues or
repaid
● Dividend payments
● Gains or losses
recognized directly in
equity
● Effects of a change in
accounting policy or
correction of accounting
error
Link between Financial Statements
https://accounting-
simplified.com/financial/statements/st
atement-of-financial-position.html

Financial Accounting

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Financial Accounting

Accounting 4. Performance - helps to

1. Financial Accounting - process of

Link between Financial Statements

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