Financial accounting is the process of preparing financial statements that companies’ use to show their financial performance and position to people outside the company, Including investors, creditors, suppliers, and customers.This is one of the most important distinctions from managerial accounting, which by contrast,involves preparing detailed reports and forecasts for managers inside the company.
Objectives of Financial Accounting
Most companies are required to prepare and make available quarterly and annual financial statements to shareholders and the investing public. There are four basic financial statements used in the corporate world to show a company’s financial performance:
On an income statement, Revenues – Expenses = Net Income.
On a balance sheet, Assets = Liabilities + Stockholders’ Equity.
Stockholders’ equity is the amount of financing provided by operations (retained earnings not distributed to stockholders) and by stockholders who reinvest through contributed capital.
A cash flow statement shows cash flows from operating activities, investing activities, and financing activities.
Preparation of the following statements/ reports (Monthly, Quarterly, Half yearly and Annual) and discussing the issues with the higher management and giving valuable and effective recommendations: