Financial accounting is classified under the head of accounting functions which specifically maintain companies’ financial transactions. Guidelines under accounting are use 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 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 values does not go into the financial statements. Under this method, all the cash related debts and credits cash entries depending 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 also go beyond other transaction that doesn’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 make available to the shareholders to investing in the public. There are financial statements that used in the corporate world that brings 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 mentions 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 that are the obligations of the company that are due 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 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?
The 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 to provide information that 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?
Difference between accounting and finance accounting is that accounting is a process of recording and maintaining and reporting the financial affairs of the company. Finance accosting totally 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 transaction of a company. Profit and loss statements for a given period and the value and nature of a firm’s assets, liabilities and owners equity.
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