The main purpose of financial accounting is to prepare financial reports that provide information about a firm’s performance to xternal parties such as Investors, creditors, and tax authorities, managerial accounting contrasts with financial accounting In that managerial accounting Is for internal decisions making and does not have any rules issued by standard- setting bodies. Financial accounting, on the other hand, is performed according to generally accepted according principles (GAAP) guidelines.
There are two main types of accounting information; financial accounting and management accounting. At the end of each financial statements are prepared to emonstrate the performance and position of the business at that current stage. D Proflt and loss account: This Is also referred to as the Income statement, In which In describes the trading performance of business of the stated period. Balance sheet: It shows a statement of the assets and liabilities for the business at the end of the stated period. Cash flow statement: This describes the inflows and outflow of the money for the business during the accounting period. C] Notes to the accounts: It displays additional details that have to be disclosed to comply with accounting tandards and the companies act. a Directors’ report: It Is a description given be the directors of the business who analyse the performance on a whole, during the accounting period.
Financial records are key elements within any business as without this the business business is in debt or not, which without the knowledge of this may reflect negatively on the business. Financial accounting aids various user groups such as owners and shareholders, as they can establish how well their business is doing and what profit or loss they have made per annum. It clearly identifies all the numerical aspects of the business and this is needed in order for the business to run smoothly.
It also benefits employees as they are able to identify how much they are being paid, and what they are being taxed. The HM Revenue and Customs all benefit from business ensuring they have accurate financial records as they can through this ensure that the business is being taxed correctly. In all, financial records are a key element within any business, and they must ensure that these records are accurate and kept up to date.