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The Principles Of Financial Accounting

Financial accounting is a field of accounting usually concerned with the reporting, analysis and decision-making of financial transactions related to an organization. This includes the preparation of financial reports for public viewing. It also involves decision-making in the allocation of resources within an organization.

The term ‘financial accounting’ is widely used throughout the world. Some countries refer to financial accounting as the ‘operative cost’, while many others use the term ‘bookkeeping’. In the United States the term is generally used to refer to the latter. Many people assume that the activities of a company in financial accounting are similar to those involved in the everyday management of that company. While these activities are very important to the well being of a company, the reality is far different.

As part of the larger field of accountancy, financial accounting is carried out by independent certified public accountants (CPA), financial accounting clerks, and other employees of financial accounting firms. A number of organizations have developed internal or contracted internal accountants for the purposes of financial accounting. Typically these accountants are not full time employees of the company conducting the accounting. However, some companies find that hiring an accountant from one of these firms allows them to focus on the areas of accounting which they are more familiar with.

Financial accounting information must be prepared in a timely manner. For instance, financial statements must be prepared and submitted to the Annual General Meeting of the corporation no later than ninety days following the end of the last fiscal year. This also takes into consideration changes made during the year as well as any adjustments that have been made to internal controls over the financial reporting system. It is essential that the accounting procedures of a company are consistent with all applicable laws and regulations as well as with internal policies. If there are serious problems with this procedure, it is necessary for the parties outside of the company to be informed so that they can take action.

The most common rules known as accounting standards are generally accepted accounting principles (GAAP). Under these principles, accounting records are categorized according to the source of funds. They are then classified according to the activities for which the funds are used. There are many principles related to GAAP, which are implemented by most companies. One of these is materialization of expenses which states that all expenses incurred within a year are written off against income within that year.

Generally there are two types of financial statements: management financial statements and sales and inventory statements. Management financial statements are prepared for the benefit of senior management. These include an income statement, balance sheet, and statement of cash flows. Under sales and inventory accounting principles, people outside the company to gather information to support management’s statistical analysis of business transactions. These transactions include products sold to customers and the number of inventory items held by the company. Sales and inventory accounting are necessary to record financial performance.

Information regarding business operations is essential for financial statements preparation. This includes acquiring information regarding sales, purchases, income, and assets or liabilities. It also involves recording transactions and identifying the basis for valuing them. It is necessary to know if a firm makes a profit, pays dividends or produces any cash.

The principle of bookkeeping is considered to be another principle of accounting. This rule states that an accountants’ work should be confined to the preparation and submission of the financial statements and related vouchers. The scope of accounting includes the collection of data in support of economic entities. In this regard accountants use different techniques and apply different software to carry out their task efficiently.

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