Financial accounting is associated with analysis, summary, and reporting of all transaction in financial sector. These all actions are taken for various business transactions. The places are many where it becomes essential to go with the most appropriate data in completing reports. Each company has its financial records.
Book keeping is the most suitable process to understand expenditure, debt, asset value, liability, and income. Bank, stakeholders, government agencies, Stockholders, employees, suppliers and business owners are the best example of financial accounting. Managerial accounting is helpful to the managers for taking decisions.
Increasing area in business in international level or local level needs proper security, and rule to communicate with other companies and customers in a better way. So, there are two types of government work for them, first local government and second one is international standard of accounting.
Sometimes students get confused between accountancy and finance. Accountancy is the summarization of procession, measurement and communication in the field of economic entities that have financial information. However, financial accounting is an appropriate part of accounting. A number of topics are there in accounting and financial is one of them.
Now, go through the points and grab information through each point.
What are the different ways of financial accounting?
- According to international reporting standards, the important information is useful in many ways as to potential investors, lenders, and creditors.
- In other ways, managing capital maintenance is the main objectives.
What are the various qualities?
The different qualities are –
- Relevance –
This characteristic means a perfect decision-making quality. Accounting information must not be influenced after making decision, and only through this feature cluttering statement is possible.
- Materiality –
Informationcould be material only in case it affects any economic decision of a user as per financial statement.
- Reliability –
Reliability is always there, where the reports are complete free from mistakes. Manager must rely on that report to make further assumption.
- Understandability –
Reports should be clear in such a way that each user of this report can easily understand everything.
- Comparability –
To acquire meaningful and exact conclusions comparison of financial reports is done from different time. It shows how accounting policies work in a positive or negative manner.
Financial statements and their components
Financial statements are essential to express the final report and current financial capability of a company or business. This helps in taking the next step. Here are some important components to understand the monetary statements with complete accuracy.
Statement of financial cash flow
Cash flow is important to understand closing balance in which inputs as well as outputs is considered as the prime keys. This cash flow is important for a particular period.
Closing balance = Cash inflow – cash outflow + opening balance
Profit and loss statements
This statement indicates the income or profit in a time period. Mostly in one fiscal year, the worth in an account is a profit statement. However, if its not perfect and earning goes negative, then it’s a loss statement.
There are some important factors on which the company’s profit or loss depends. These are –
- Cost of sold items
- SGA (Selling general and administrative expenses )
- Interest and Tax expenses
Now, you are able to find out the exact profit or loss. Profit shows earnings and proper ability to take another step in progress or development of a company. But, loss may create a lot of difficulties in progress of a company.
Balance Sheet or financial position statement
Balance sheet shows statement of financial position in which capital, asset and liabilities are involved. The most accurate accounting formula is
Assets = Capital + Liabilities
It always shows the impact after a fiscal year. It also shows a company’s status. The most accurate liquid asset of a company is liquid asset. Some factors in current assets are –
- Cash – It is the physical money and most common one for the liquid asset.
- Accounts receivable – This one is the earned revenue.
- Prepaid expenses – These expenses are advanced paid in the current year
- Merchandise inventory – In case a firm owns some goods for a business and it needs to be sold out completely. Various services also come in this category through which a business earns money.
- Marketable Securities – In this when one firm invests bonds or stocks or both in any other firm.
Retained earning Statement
Other statements indicate the statement of current year through which shareholders and income distribution get affected. However, in this statement the profit or gain till date by accumulating all profit amounts of all years in known as retain earning.
This can easily expressed as –
- Retained earning total or at the end period = Retained at the beginning + Net income – Dividend
- All these are very essential for acquiring the final result. So, you must understand each term perfectly to grab the most accurate answer for your accounting solution.
What are the basic terms that you must know?
Before you complete the report, you must go with the following terms –
- Fixed asset –
These assets are long term. Property, building and equipment come under this category.
- Intangible assets –
The most accurate examples are trademarks, patents, goodwill and copyrights.
- Current liability –
Trade account payable, dividends payable, employee salaries, debt or interest payable are the most accurate categories under this.
- Liabilities of Long term –
Payable for bonds and mortgage notes come under this.
What are the objectives of financial accounting?
The prime objectives of financial accounting are as follows –
- Systematic recording –
The prime objective is recording everything in a systematic way. All transactions are then classified as well as summarize properly. It is important for analyzing and interpretation.
- Ascertain of recorded transaction –
Rational decisions are done on the basis of loss and profit. Thus, the report in particular time period is important to evaluate the profit and loss.
- Ascertainment of proper position –
The business also records whatever owes and owns in a particular time. It means what are the liability and assets regarding a business. All these are available online through financial statements.
- Acquiring information –
Decision making for the users and the management is very important. So, when there is proper information, then fiscal statements work accurately to complete different reports. Decision making in rational assumptions take place.
- Solvency Position –
It indicates the liquidity position in a business. It means all important requirements as profit, loss, liabilities and assets are essential for a business, however, at last the requirement is liquidity. This is determined for a short run, and for a long run the determination is known as solvency position.
Now, it is very much clear hat why objectives are essential for students to understand before they start solving problems in financial accounting.
Is there any confusion between financial accounting and cost accounting?
Many students get confused between financial accounting and cost accounting because they do not understand the meaning of that.
- Financial accounting aims of making statements on the proper information gathered after getting profit or loss in a certain period of time, mostly annual report shows that. In case of cost accounting, there is a computing cost relevant to business as goods.
- When a person or managers go with cost accounting, he just gathers information for preparing internal report or budget for a company for making forecast assumption. In financial accounting, the complete process is done for outsiders as stakeholders, investors, managers, stockholders and government employees.
- Cost classification in case of financial accounting is done in various manners as insurance, repair, salaries, etc. However, in case of cost accounting, the classification is different because it is relevant to all functions. These are – process, activities, products, and complete internal planning.
Cost accounting is important for budgeting of a company without informing anyone else than the own members in the management. So, when students solve problems or when they study a case, they must understand the proper meaning of this.
What are the purposes that accounting serve?
The accounting provides the most appropriate purposes as –
- All general mottos of accounting statements
- Purpose is also about producing relevant information of planning, decision making, and performance evaluation.
- Financial statements are essential for regulatory requirements.
Accounting works accurately when the reports give perfect calculations till end of a year. A company’s profit and loss depends on a complete accounting year.
Why students should go with this branch of accounting?
First question that comes in their mind is how suitable financial accounting is for their future need. How this gives a permanent job in the competitive market? In this era of technology where competition is everywhere, companies look for the best employees in the position of accountant where they can skillfully handle the different reports and data and submit them to the higher level of management on time.
It means financial accountant will surely get proper placement and able to rise in their near future. Many students do the courses and master degree in this branch of accountancy and provide their complete support to the business world. As the number of companies are increasing with new facilities to their employees and high salaries, so anyone who is interested in this field of accountant can easily enjoy his working hours.
Student’s difficulties in financial accounting
After proper explanation of financial accounting, it is important to know that a number of students are unable to complete their work at the college level or university level. They face difficulties because of some common reasons as –
- Lack of confident on base knowledge
- Improper guideline
- Lack of practice on different problems
- Incomplete assignment
- No time management
All these are the prime points in failure of a student’s success. If you have the difficulties and the reasons are same, you should immediately work on it to develop your knowledge and confident level.
How to improve knowledge in financial accounting?
- Know each small term for understanding each report and each theoretical expression. If you skip this point, you will never ever achieve the position that you are hoping.
- Go through the reports, understand them and prepare it again. If you understand and then practice accordingly you will surely achieve your target.
- Case studies play an important role for students. A number of case studies are provided to the students for their project work. Some case studies are small and some are big. Students must go through each case to enhance their outer knowledge and overcome the issues they face during solving problems.
- Assignments and homework are important. To do tasks completely and perfectly, it becomes important to prepare notes. This part of accounting will be easier if students go with right knowledge.
- A number of online service providers are available through online, if you have any reliable website or service provider, you can easily take services to solve your difficulties your problems.
These all points will assist you whenever you feel that problems in this part of study are not easy and you are unable to solve accurately.
How experts help students through online?
This is an internet era through which anyone can easily fulfill his target. In the field of education too, the students need assistance and they think of getting an exact way. Online tutorial or online homework help services provide them opportunity to improve their knowledge.
- Students can easily apply and short out their difficulties through online any day and on any time.
- It becomes easier for them to understand the cases which they are unable to solve.
- Easy to understand language of accounting faculties make students very much confident in understating each nook.
- Through online students can easily utilize their time. Moreover, reliable service providers are ready to provide answers as soon as possible.
- Most important thing is the faculties are experts and have a good experienced in providing assistance to
Now, it is clear that how financial accounting is important in corporate sector. It is also clear that why students should go with this part in their near future. In case of confusions they can easily improve their knowledge through online homework help services. Only with the right way, one can find achieve his goal in financial accounting. So, you can easily select an expert for taking service.
Author Bio –
Evelyn W. Minnick known as financial accountant has an experience of more than 6 years in Harvard University. She understands the difficulties in finance for students who are unable to grab the right knowledge along with the requirement of course. So, she is available through online homework help services to overcome your doubts. Anyone can apply to get cent percent right solution now.