Financial accounting is a process of assembling and summarising the financial data of the organisation to formulate financial reports such as Balance sheet, an Income statement for an organisation’s management, Text authority, Suppliers, Inverters, lenders and various stakeholders.
It performs various functions, for example, it controls inflow and outflow of money in the organisation.
The value of money which an organisationis spending and getting by the business which the organisation is doing, Also known as the expenditure and the revenue which the organisationsmakewhether or not the monetary term is involved. We can record the accrual expenses in the book of accounts when it is paid rather than the deal is done.
Cash flow statement:
In the past cash flow was known as flows of the fund which the company which the company owns.
Cash knows toevaluate the following terms;
*Inflow of cash.
*Outflow of cash.
The main use of the cash flow for any company is that they can have an idea of from where the money is coming and where they are spending it.
Double entry accounting:
In double-entryaccounting, if any financial transaction arises it will affect two sides of accounting, Transaction always is directly or indirectly proportional to two different accounts of the company.
As we all it is mandatory to disclose the financial reports of an organisation for various users to know the progress of the organisation. By looking into it, the users can decide whether or not to invest in the company. Financial reporting is a report which we make according to the period to analyse the position of the company, It shows how the company is performing in the business, and after having a look over the financial report of the company, the higher authorities can plan the business accordingly.
We make a financial report for internal and external users.Financial accounting is an essential accounting function.
*Internal users include the management of the company.
*External users can be shareholders, Lenders, Suppliers, Customers, Government agencies, Employees and other financial analysts.
Financial statement is a systematic record of monetary actions. In this statement, we assemble appropriate accounting updates. The financial statement refers to thegathering of accounting reports which includes financial conditions, cashflows and financial results of an organisation.
Financial Statement can be useful for deriving financial ratios. We can evaluate the capability of an organisation by checking the financial statement that how much progress the company is going to have in recent time. Three important elements of Financial Statement are Balance Sheet, Income Statement, Supplementary notes and cash flow statement.
Balance sheet is a monetary report of a company that contains Liabilities, Assets, equity capital and debts. There are always two columns in thebalance sheet, Which are theside of assets and side of liabilities of the company.
Assets are the valuable things which the company owns in physical form; It can be of two types which are long-term assets(Land, Machinery, Buildings) and short-term assets(Cash,Prepaid expenses,Accountreceivable).
Auditing is formal scanning which is done in the company to get the information about how the company is progressing.
It is a process of planning for future sales, Cash collections, Future disbursements and estimation of day to day activities and outlining it into the balance sheet and income statement.
*Balance sheet analysis:
Balance sheet analysis is a detailed examination of assets, liabilities and equity of a company. It analysis the two sides of thebalance sheet which are assets and liabilities of the company. The company can also be judged bybalance sheet to invest on.
Cost analysis is done by the company to check the strong and the weak points of the company, It also helps the company to pursue profits while doing savings on the other hand.
Taxation is the way out of Government to pile up the cash from the public in a various manner.
Different types of taxation are Income Tax, Unemployment Tax, GST, Foreign Tax, Payroll Tax, Federal Income Tax ETC. This money which government collect from the people is to be spent on Education, Defence, Health, Public parks and libraries.
Fund accounting is one of the types of accounting which is used by the non-profit organisation. It focuses on accountability, not on profitability. It is done because for themost non-profit organisation is more important to know where the money is flowing out than how the organisation earns money, This is because the non-profit organisationhas different sources of funds by donations and they must know where the money is spent or they are going to spend.
It is a continuous procedure of recording and analysing, classifying and summarising and preparing
financial books for all transaction in the business.
*Going Concern Assumptions:
According to this accounting concept, it is assumed that business will pursue the long term.Going concern is the assumption which company makes that the company is going to make enough money to stay in the competition to avoid bankruptcy.
ASeparate entity is an accounting concept which tells us that the business and the businessman are two different entity. They can’t be taken together as one entity and mentioned together.
*Consistency Financial Unit:
According to this accounting principle same accounting treatment will be considered for similar events.
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