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What is Financial Accounting?

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  • Written By: Carol Francois
  • Edited By: Bronwyn Harris
  • Last Modified Date: 13 September 2016
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Financial accounting is focused on providing accounting reports and analysis to other areas of the business. Financial accountants are responsible for the creation and issuing of the company's financial statements, providing accurate and timely information to management and ensuring that all regulatory reporting requirements are met. In financial accounting, the goal is to consistently provide the valuable, accurate and reliable information.

The issuing of the financial statements is the responsibility of the financial accounting department. These statements summarize the business's activities for the year and are used by shareholders, banks, employee bargaining units, and the general public to evaluate the financial worth of the company. The statements are audited by independent accountants to validate the information and provide assurance to readers.

The financial statements are comprised of five documents; balance sheet, income statement; cash flow and owners or shareholders equity and notes. Notes to the financial statement are written explanations of items in the financial statements. Any unusual items or change in procedure that has impact on the financial statements are detailed here.

The balance sheet is a summary of all the assets and liabilities at year's end. The accounts reflect the total amount of cash and liquid assets on hand, the amount of debt the company is carrying, and how much money was spend in various categories. Financial accounting firms perform analysis of these values using ratios and other calculations to determine the financial health of the company.

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An income statement is a critical component in financial accounting. It provides a clear list of all the sales for the year, the expenses and the net profit or loss of the firm. This statement provides insight into the sales performance for the year and the overall profitability of the firm.

A cash flow report provides details on funds received and disbursed. This section provides insight into the revenue values listed in the income statement. Funds received or lost from interest bearing investments are detailed here.

The statement of owners' or shareholders' equity shows the total net income from the year and how it will be distributed among the shareholders or reinvested in the business. Publicly traded companies must provide the number of shares issues, the type of share and the amount of divided to be paid on the shares, based on the articles of incorporation and the shareholder agreement.

All certified public accountants have complete intermediate and advanced courses in financial accounting. There is no additional designation for a financial accounting specialty. The skill set for a financial accountant must focus on analysis and data manipulation software and tools.

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anon108104
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this was very helpful. thank you wisegeek.

anon35792
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Thanks for the information ..

:)

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