Financial Accounting – Introduction and its Functions

In this article, we will discuss the meaning, Definition and functions of Financial accounting. With the help of these three items you will understand the actual meaning of Financial accounting.

What is Financial Accounting?

Financial Accounting is the measurement, processing, and communication of financial information about a business or organization.it is basic accounting or initial level accounting in which we are recording, summarising and analyzing day-to-day transactions of the particular business. and at the end, we will get to know about the financial position of a business or an organization by preparing the Profit/loss and balance sheet of the business in the particular financial year.

Meaning of Financial Accounting explained with the help of an Animated Video:

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Definition of Financial Accounting: –

-(AAA) The American Accounting Association.
“The process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information.”

-AICPA The American Institute of Certified Public Accountants.
“Accounting is the art of recording, classifying and summarising, in a significant manner, and in terms of money, transactions and events which are, in part at least of a financial character, and interpreting the results thereof.”

Functions of Financial Accounting:-

We will know more about the financial accounts by knowing the following functions of it: –

The main function is to make systematic records of the financial transactions of the business. Systematic records mean the use of the standard of financial accounts and the nation’s government guidelines to record each and every financial transaction of the business enterprises.

After recording the financial transaction of the business in a systematic way, the team financial accounting has to analyze and summarises the whole transaction to show the correct financial position of the business. The team will analyze it in Trail Balance and summarise it in the final account to know the profit or loss of business enterprises in a particular financial year.

The Team of FA has to communicate the results of the business’s financial position of a particular financial year to all the parties. They will provide them with the Financial Statement: –

The Team of financial accounting has to meet the legal requirement. like Auditing the books of the particular financial year from an external Auditor and paying tax liabilities as per the taxation system of the country law.