Financial Accounting is 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 Profit/loss and balance sheet of business in the particular financial year.
Definition of 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.”
We will know more about the financial account by knowing the following functions of it: –
1) Systematic record: –
The main function is to make systematic records of financial transaction of the business. Systematic records mean use standard of financial accounting.
2) Analysing and Summarising: –
After recording the financial transaction of business in a systematic way, the team of financial accounting has to analyze and summarise 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 that business had profit or loss in a particular financial year.
3) Communicate results: –
The Team of financial accounting has to communicate results of business financial position in particulars financial year to all the parties: –
4) Meet legal requirements: –
The Team of financial accounting has to meet the legal requirement. like Audit the books of the particular financial year from external Auditor and paid tax liabilities as per the taxation system of the country law.
After Know Functions of Financial accounting, we will explain to you the main terminology of accounting we will all the basic terms of accounting as shown in the following images in next chapters.
If you have any question about this topic please ask it in the comment section below: –