Running head: Financial Accounting

Financial Accounting

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Financial Accounting

Executive Summary

Financial accounting is a field of accounting concerned with the analysis, reporting and the

summary of the financial transactions referring to the business. Financial accounting is utilized to

prepare the accounting information for a group outside the firm or not involved in the daily

running of the company. Managerial accounting offers accounting information or data to assist

managers to make appropriate decisions to handle or manage the firm’s business. Financial

accounting involves the research of financial statements obtainable for the public consumption.

This report highlights the regulations and principles relating to consultancy and rules as well as

conventions relating to the accountancy of a junior accountant company.

Financial Accounting

Contents
Financial Accounting ...................................................................................................................... 4
Regulation related to financial Accounting .................................................................................... 5
Accounting rules & principles ........................................................................................................ 5
Conventions and concepts relating to consistency and material disclosure ................................... 6
References ....................................................................................................................................... 8
Financial Accounting

Financial Accounting

Financial accounting is a process for preparing the financial statements. Companies are used to

present their financial positions and performance to outsiders including creditors, suppliers,

customers, as well as investors. This is the most significant differences in management

accounting, while management accounting involves preparing forecasts and detailed reports for

the company's internal management staff. Financial accounting also includes a process of

recording, aggregating, and reporting the countless transactions that result from company

operations over time (Xie, 2015). These transactions are then summarized in a preparation of the

financial statements, such as balance sheets, cash flow and income statements, which cover the

firm's operating performance during a specific period of time. Financial accounting adopts a new

series of well-established accounting standards or principles. The choice of the accounting

principles in the financial accounting process depends on reporting and the regulatory

requirements that companies face. For listed companies in the US, companies need to conduct

financial accounting according to GAAP. International listed companies also regularly reporting

on the financial statements according to International Financial Standards. Establishing these

accounting standards or principles provides consistent information for investors, regulators, tax

authorities and creditors (Flesher, Flesher & Previts, 2018). Financial reports occur through the

usage of the financial statements. Financial statements list the five major categories of the

financial data: income, expenses, resources, equity, and liabilities. Income and operating cost are

calculated and reported in the income statement. Assets and liabilities and fair play accounts are

always reported on a balance sheet. Balance sheet uses financial accounting to account

ownership of company's potential economic benefits.

Financial Accounting

Regulation related to financial Accounting

An important part of professional regulations and corporate law requirements is to make sure that

the proper details are provided in an easily understandable layout to meet the needs of various

users. These regulations and rules must be discussed briefly in the advanced financial

accounting. It must be clear that the data provided in advanced financial and financial accounting

are combined to describe the financial accounting procedure in detail. The company must be

aware of the information provided in the financial accounting is hypothetical knowledge.

Advanced financial accounting exams are likely to include areas covered by financial accounting

(Musilek, 2012). When a person chooses to start a business, the company can proceed in any of

the following ways: sole proprietors, partnerships, limited companies or European companies. A

company operates within Europe and is governed by EU law and applies directly to member

states instead of national laws. Deciding which media can conduct business depends on many

factors. Conducting a business through every type of commercial entity has disadvantages and

advantages. In addition to European companies, these companies have conducted a review of

financial accounting moreover are assumed to be known (King, 2017).

Accounting rules & principles

Accounting principles basically are some rules plus guidelines that company has to follow when

reporting the financial data. General U.S. accounting guidelines or principles is GAAP. To

continue listing on many of the main stock exchanges in the US, the company should

periodically submit financial statements in accordance with U.S. General Accounting Standards.

Accounting principles vary from nation to nation. Due to the different accounting principles in

different parts of the whole world, investors must exercise concern when comparing firms from

diverse countries (Habib, Ranasinghe & Huang, 2018). The issues of differences in the
Financial Accounting

accounting principles are not a problem in the mature markets. However, investors must be

careful because, under many accounting standards, the misrepresentation of the figures still

exists. The professional accounting world is governed by general concepts and rules and is called

basic accounting guidelines and principles. Together they simply form the basis for more

complex, detailed and legal accounting rules.

The debit payee, credit giver: This principle is utilized for personal accounts. Also when

person organizes something, it becomes inflow, so this person must have credit on the books.

The opposite is true, that is why receivers need to be debited (Strouhal, Paseková & Müllerová,

2011).

Debit content loaned content: This principle applies to real account situations. Real accounts

include machinery, buildings, and land etc. They default to a debit balance. Therefore, when you

borrow cash, you will increase the accessible account balance. This is closely what desires to be

complete. When corporate credit goes out, then they are dropping the account balances when

tangible assets leave the company.

Debit all fees and losses, credit income and benefits: Apply this rule when the problematic

account is a supposed account. The company’s capital is a responsibility. So it also has a non-

payment credit balance. When companies classify all the benefits and benefits, they increase

capital and debt costs and losses, furthermore reduce capital. This is just what the system needs

to do to maintain balance.

Conventions and concepts relating to consistency and material disclosure

Accounting practice refers to the practice generally followed when presenting and recording

accounting information for business entities. They follow customs, traditions, etc. in the society.

Accounting practices have evolved over the years through consistent and regular practices in
Financial Accounting

order to have a unified record in the accounts books (Hazera, Quirvan & Triki, 2017).

Accounting practices help compare accounting data for diverse business units and units in

diverse periods. These have also been developed for many years. The significant conventions

that have been utilized for a long time are coherence conventions, the full disclosure of

conventions, importance conventions, and conservative conventions. Therefore, according to this

Convention, similar accounting method should be used every year when preparing few financial

statements. However, this does not imply that once a specific accounting method is adopted, it

can’t be changed. Whenever the method changes, it must be disclosed in footnotes in financial

statements for the current year. Consistency practice means that the similar accounting principles

must be used to prepare financial statements every year. If company compares them periodically,

they can draw meaningful conclusions from the same company's financial statements. However,

this is only possible if the accounting practices and policies followed by a company are reliable

and consistent over time (Collins, Pasewark & Riley, 2012). If diverse accounting practices and

procedures are used to compile financial statements for different years, the results will not

comparable. The concept of importance is a principle of accounting, trivial things will be

ignored, and all essential things must be disclosed. Important items are important items. For

example, U.S. GAAP states that if the project “may affect the financial decisions of users of

financial statements”, the project is substantive. The “major convention” stipulates that in order

to make the financial statements significant, users who only provide important relevant

information and accounting information here are an important fact. The nature of the fact based

on its quantity and nature involved (Arthur, 2009).

Financial Accounting

References

Arthur, A. (2009). Principles and rules: the open question argument and normative imperatives.

International Journal Of Critical Accounting, 1(4), 313.

Collins, D., Pasewark, W., & Riley, M. (2012). Financial Reporting Outcomes under Rules-

Based and Principles-Based Accounting Standards. Accounting Horizons, 26(4), 681-705.

Flesher, D., Flesher, T., & Previts, G. (2018). The Financial Accounting Standards Board:

Profiles of seven leaders. Research In Accounting Regulation.

Habib, A., Ranasinghe, D., & Huang, H. (2018). A literature survey of financial reporting in

private firms. Research In Accounting Regulation.

Hazera, A., Quirvan, C., & Triki, A. (2017). Too big to fail and bank loan accounting in

developing nations: Evidence from the Mexican financial crisis. Research In Accounting

Regulation, 29(2), 109-118.

King, T. (2017). Learning from ecology: Financial reporting as a ‘commons’. Research In

Accounting Regulation, 29(1), 75-78.

Musílek, P. (2012). Hedge Funds and their (Non)regulation. European Financial And

Accounting Journal, 2012(2), 7-23.

Strouhal, J., Paseková, M., & Müllerová, L. (2011). Comparative Analysis of Czech Accounting

with International Regulation from SMEs Perspective. European Financial And

Accounting Journal, 2011(1), 39-59.

Xie, Y. (2015). Confusion over Accounting Conservatism: A Critical Review. Australian

Accounting Review, 25(2), 204-216.