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The field of accountancy is determine to give a full detail of the business in all ways the entries done to maintain the accounts of the business in all manners which do includes the summary, reporting of transaction and analysis of accounts is known as financial accounting, it also includes all kind of preparation done in maintain the financial accounts which is latter available to the public, banks or stakeholders, there are two general methods to maintain financial accounting one in the local method of accounting and the other one is the international accounting standards, the GAAP is the most common patter to frame the account books under its guideline the financial accounting are available for any kind of jurisdiction.

The basic and important objective to have a financial accounting system in the business entity is to make the accounts available for the public in simple manner so that the lenders and also the creditors of the business can know the financial status of the company whereas according to the European Accounting Association the objective of financial accounting is to compete the financial reporting, coming to the qualities of  the financial accounting it should be in a simple manner so that common public can understand the business progress, it should comply with the following objectives, the relevance to the financial statement should be simple and it should be decision specific, the financial accounting should be influenced to take some specific decision there should be no cluttering in the statement so that the characteristic should be good, when any kind of information is provided it is considered as material, keeping in mind if there is omission in preparation of any kind of financial statement it can affect the economic decision, the financial accounts which are prepared should be fully reliable means there should be no error in preparing the statement, the understandability should be good it means everything should be expressed in the simple manner in the financial statement, the comparability of the financial reports should be available to compare with other financial years as it is helpful to the performance of the business from year to year, which is good for the investors.

There are five main components of financial statement, first is the statement of the cash flow it is prepared with in the records book to maintain the entries related to all kind of cash flow in the business it can be inward or outward in any reason the basic concept of cash flow is to record the opening balance, the second is the preparation of profit and loss statement which is helpful to the situation of the business profit, next comes the statement of the financial position it helps to know the financial position of the business in all manners for everyone, then comes the statement of change in the equity it shows the current stakeholders and there sharing in the business and the last one is the note of the financial statement.

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Created on Dec 31st 1969 18:00. Viewed 0 times.

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