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Definition of Financial Accounting
Here, accounting – financial accounting
Accounting is a systematic process which is normally started with a conceptual stage such as the identification of the business transaction of a business transaction and end with user satisfaction. In traditional accounting, only the technical part of accounting or bookkeeping
In conclusion, accounting can be defined as a systematic process of identifying, measuring, classifying, summarizing and communicating the economic transaction to permit informed judgment and decision making by the users. It is termed as a language of business as it conveys the business affairs.
May we point out some functions of financial accounting as below:
- Financial accounting is the process of identifying, measuring and communicating economic information to users.
- Also, it used to prepare the financial statements and communicate with the users.
- It analyzes the business affairs in totality.
- It records the past transactions only.
- Similarly, it provides information to external users to the organization like shareholders, investors, creditors, labor unions, etc.
Users/ stakeholders of accounting information
- Various levels of management (they used the information to know the performance and growth rate of the company)
- Investors/ shareholders ( they used information to know profitability scenario investing in the respective company’s share, know the paying dividend level, company’s performance)
- Suppliers/ creditors ( to know the risk of bad debt, credit terms time)
- Customers/ debtors ( to know the quality of with company’s product, its product is reliable or not)
- Bankers (to know the ability to pay loan and interest, to take interest rate)
- Government (to know the performance on paying tax, overcharging consumers)
- Society ( to know the company’s product quality, its performance towards the society on pollution control)
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Solution of financial accounting problems 2018