Financial Accounting
Financial Accounting is the recording, summarizing, and reporting a company’s financial transactions. The goal is to provide a clear and organized view of a business’s financial activities and health for external stakeholders like investors, lenders, and regulators. Financial Accounting typically generates
-Income Statement: Shows a company’s revenues and expenses over a period, revealing its profitability.
-Balance Sheet: Provides a snapshot of a company’s assets, liabilities, and equity at a specific point in time.
-Cash Flow Statement: Summarizes the cash generated and used by a company over a period, categorized into operating, investing, and financing activities.
The primary purpose of financial accounting is to provide stakeholders with reliable information to make informed decisions. This includes decisions about investing, lending, and evaluating the company’s financial performance and position. It also helps in ensuring compliance with legal and regulatory requirements, according to BMC Training.
(i) The Financial Accounting Standards Board (FASB) sets accounting and reporting standards for public and private entities following Generally Accepted Accounting Principles (GAAP) in the U.S..
(ii) The Governmental Accounting Standards Board (GASB) establishes GAAP for U.S. state and local governments.
(iii) The International Accounting Standards Board (IASB) develops International Financial Reporting Standards (IFRS), used globally to enhance financial reporting.
(iv) The Federal Accounting Standards Advisory Board (FASAB) issues standards for the U.S. federal government.
(v) The Securities and Exchange Commission (SEC) has the authority to set and enforce accounting standards, particularly for public companies adhering to GAAP.
(vi) The Public Company Accounting Oversight Board (PCAOB) oversees audits of public companies.
State Boards of Accountancy regulate licensed accounting professionals within their states.
(vii) The American Institute of Certified Public Accountants (AICPA) develops standards for audits of nonpublic entities and sets ethical requirements for its members.
(viii) The National Association of State Boards of Accountancy (NASBA) coordinates state boards and promotes uniform regulations.
