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Financial accounting is a branch of accounting that keeps track of financial transactions. Using the given guidelines, transactions are recorded, summarized and presented in the financial report or financial statement such as the income statement or a balance sheet. Companies issue financial statements on a regular basis as they are a record incentive for the company’s stakeholders. The main purpose of financial accounting is to provide information for people to assess the value of the company. Financial accounting has common rules known as accounting standards because financial statements are used by a variety of people in their desired ways. Financial accounting is concerned with summary, analysis and reporting of financial transactions regarding a certain business. This is done by simply preparation of financial statements. Financial accounting has the following qualities: relevance, reliability, understandability and comparability. Financial statements have the below components:
Financial accounting serves to fulfil certain objectives. These objectives would be: systematic recording of transactions, proving of the recorded transactions, showing the financial position of the business and providing information for rational decision making.
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