Financial accounting is classified under the head of accounting functions which specifically maintain companies’ financial transactions. Guidelines under accounting are used for summarizing and classifying all the transactions.
This also includes preparing the financial statements of a company which gives an overview of the economic stability of a company to its investors.
The types of accounting are district, both methods rely on the same conceptual framework of double-entry accounting to record analyze, and report transactional data at the end of a given period.
Types of Financial accounting are mentioned below
The role of financial accounting is to serve as a form of control within an organization. Financial accounting also functions to assist business owners in making vital monetary decisions. There are various types of financial accounting, including:
- Method of Cash Accounting
- Accrual Accounting
- Companies Financial Statements
- Method of Cash Accounting
- Income Statement
- Balance Sheet
- Statement of Cash Flows
- Retained earnings statements
Method of Cash Accounting
Business prefers to go for a cash accounting method to focus solely on the transaction that involves cash. Any other transaction that doesn’t involve any monetary value does not go into the financial statements. Under this method, all the cash-related debts and credits cash entries depend upon the number of transactions made.
Accrual Accounting
All the company records under the accrual method maintain the transactions regardless of any monetary value. This also includes making entries regarding cash go beyond other transactions that don’t involve munch monetary transactions. The accruing method in financial accounting is accumulating an item and recording it legally when a cash transaction takes place.
Companies Financial Statements
All the financial statements are put together quarterly and annually and they are made available to the shareholders to invest in the public. There are financial statements that are used in the corporate world that bring out the financial statements of a company
Income Statement
This is also known as the statement which brings out the profit and loss of a company. Revenues, expenses, and gains are mentioned in the financial statement. This also includes the operating and non-operating expenses.
Balance Sheet
The balance sheet of a company is divided into three parts 1) assets 2) liabilities 3) stockholders’ equity at a specified date.
- This also includes the company’s assets also includes things such as cash, accounts, inventory, prepaid insurance, and equipment.
- The liabilities part in the second schedule includes the liabilities of the company which are the obligations of the company that are due and are often included under the word payable.
- The last part includes equity and stockholders and the different assets and liabilities.
Statement of Cash Flows
The statement of cash flows explains the change in company cash during the time interval indicated in the heading of the statement.
The change is divided into three parts
- Operating activities
- Investing activities
- Financing activities.
Retained earnings statements
This covers the dividends paid from the shareholders and also the amount earned from the company.
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What are the different types of Accounting?
- Financial Accounting
- Public accounting
- Government Accounting
- Forensic Accounting
- Management Accounting
- Tax accounting
What is the main purpose of financial accounting?
The major goal of accounting services is to provide information that is needed for sound economic decision-making. They also make financial reports that provide information about a firm’s performance.
Difference between accounting and financial accounting?
The difference between accounting and finance accounting is that accounting is a process of recording maintaining and reporting the financial affairs of the company. Finance accosting outlines the financial position of the company.
What is the meaning of accounting?
Accounting is a process that includes the recording, summarizing, and interpretation of all the financial transactions of a company. Profit and loss statements for a given period and the value and nature of a firm’s assets, liabilities, and owner’s equity.
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