Financial Accounting


Introduction

The key to understanding business is to understand accounting. Accounting is central to the operation of modern business.  Accounting enable businesses to keep track of their money (cash). If businesses cannot make enough profit ( or generate enough cash), they will go bankrupt !. Often accounting is called the ‘language of business’.

It provides a means of effective and understandable business communication. If you understand the language you will, therefore, understand business. However, like many languages, accounting needs to be learnt.

There two types of accounting

  1. Financial accounting
  2. Management accounting

The aim of financial accounting is record, process and prepare report of cash transactions but management accounting will process data of manufacturing.

Duties of Financial Accounting

  • Financial accounting reports describe the whole of the business
  • Financial accounting statements must be prepared to conform with the legal requirements under accounting standards such as the FASB in USA, ASB in the UK
  • Financial accounting reports what happened in the past in an organization
  • A detailed set of financial accounts is published annually