Introduction to Financial Accounting

Financial Accounting is the process of recording, summarizing, and exposing the multitude of transactions that occur as a result of corporate activity during specified time period

These interactions are condensed in the drafting of financial summaries, which include the accounting report, expenditure exposition, and income proclamation, which document the organization’s working execution over a certain time.

Financial Accounting is used to report financial transactions to stakeholders in an acceptable and flexible way to the users of Financial Statements such as Company management, Competitors, Customers, Employees, Government, Investment Analysts, Investors, Lenders, Rating Agency, Suppliers etc.

Financial Accounting Concepts

• Accrual Concept : Financial Accounting can be performed on either an accrual or cash basis. Accrual foundation is often used. A company may also utilize a mix of the two. The cash foundation of accounting requires transactions to be recorded only when there is a cash flow. However, in accrual accounting, a transaction is recorded when it occurs and revenue is recognized. Once an organisation has decided on a system, whether cash or accrual, it should stick to it.
• Economic Entity Concept : The economic entity assumption is an accounting approach that isolates the business’s transactions from its owner and therefore  no personal interactions should be recognised in the books of accounts.
• Going Concern Concept : The going concern assumption is a fundamental Financial Accounting theory that states a company’s financial stability is sufficient to keep it in operation in the long run, or at least beyond the next Financial period. Profits can be earned in the future because an entity does not intend to or is not compelled to liquidate the same.
• Materiality Concept : The purpose of preparation and presentation of Financial Statement should be to reveal every material transaction or exchange. Material exchanges are those transactions that, when removed, can alter a speculator’s analysis of the firm.
• Conservatism : The conservative principle is the broad idea of recognizing costs and liabilities as soon as feasible  and when the outcome is uncertain, but only recognizing income and assets when they are certain to be received. Accounting conservatism encourages managers to exercise professional judgement, but it also leaves loop hole for some manipulation of accounting entries.
• Matching Concept : According to the matching concept, businesses should match relevant income and spending in the same accounting period. They use this to match an asset’s or revenue’s expenses to its economic benefits. Recognizing costs in wrong accounting period can drastically affect the financial statement. A company’s financial status may be erroneous as a result. The matching concept assists firms in avoiding understating or overstating it’s profit for a given period.

There are several Financial Advisory and Accounting Firms that provides the services of the Financial Accounting online. These firms help the entity with their accounting tasks and also provides several other services like E- Commerce Accounting Services, Flexible Accounting Solutions, Budget Forecasting, Break-even Point Analysis, Accounting Supervision, etc. so that the entity can concentrate on their core areas of expertise and take their businesses to the greater heights.