Types of Financial Accounting

Financial accounting is classified under the head of accounting functions which specifically maintain companies’ economical transactions. Guidelines under record-keeping are used for summarizing and classifying all the transactions.

This also includes preparing the economical 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 record-keeping to record analyze, and report transactional data at the end of a given period.

Here Are the Types of Financial Accounting

The role of economical accounting is to serve as a form of control within an organization. Economical record-keeping also functions to assist business owners in making vital monetary decisions.

There are various types of economical accounting, including:

1. Method of Cash Accounting
2. Accrual Accounting
3. Companies Financial Statements
4. Income Statement
5. Balance Sheet
6. Statement of Cash Flows
7. Retained Earnings Statements

Method of Cash Accounting

Business prefers to go for a cash record-keeping 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 economical statements are put together quarterly and annually and they are made available to the shareholders to invest in the public. There are economical statements that are used in the corporate world that bring out the economical 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 economical 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 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:

1. Operating activities
2. Investing activities
3. Financing activities.

Retained Earnings Statements

This covers the dividends paid from the shareholders and also the amount earned from the company.

Also read: Bad Debts in Accounting

FAQs

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 economical record-keeping 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.

What Is the Difference Between Accounting and Financial Accounting?

The difference between record-keeping and finance record-keeping is that accounting is a process of recording maintaining and reporting the economical affairs of the company. Finance accosting outlines the financial position of the company.

Read More: Forensic Accounting Expert Witness: How an Expert Can Help

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