Introduction to Financial Accounting

Financial accounting is the general branch of accounting used to track the company's financial transactions. Use standardized guidelines, transaction records, summarize them, and display them in financial reports or financial statements, such as income statements or balance sheets.

These statements are considered external factors because they are given to people outside the company, the main beneficiaries are the owners/shareholders, and certain lenders. However, if the company’s stock is publicly traded, its financial statements (and other financial reports) are often widely disseminated, and the information needs to reach secondary beneficiaries such as competitors, customers, employees, labor organizations, and investment analysts.

It is important to point out that the purpose of financial accounting is not to report the value of a company. Rather, its purpose is to provide others with enough information to evaluate the company’s value.

External financial statements are used by various people in various ways, and financial accounting has conventional rules called Accounting Standards and is accepted as Accounting Principles (GAAP). In the United States, the Financial Accounting Standards Board (FASB) is an organization that sets accounting standards and principles. Stock-listed companies must also meet the reporting requirements of the U.S. government agency, the Securities and Exchange Commission (SEC).

Double accounting and accrual basis

The core of financial accounting is a system called double bookkeeping (or "double accounting"). Every financial transaction made by the company is recorded by this system.

The term "double-entry" means that at least two accounts are changed for each transaction. For example, if a company borrows $50,000 from its bank, the company’s cash account increases, and the company’s "accounts payable" increases. The double entry also means that one of the accounts must have the amount entered as a debit, and one of the accounts must have the amount entered as a credit. For any given transaction, the debit amount must equal the credit limit

The advantage of double-entry accounting is that at any time, the balance of the company's asset account will be equal to the balance of its liabilities and shareholder (or owner) equity accounts.

Financial accounting should be based on the accrual basis of accounting (not the "cash basis" of accounting). On an accrual basis, they are paid, not when they receive money. They happen, not when they are paid. For example, although the magazine publisher receives a check for $24 for an annual subscription from the customer, the publisher receives a monthly payment of $2 (one-twelfth of the annual subscription amount). Likewise, it reports property tax expenses as one-twelfth of the annual property tax bill every month.

According to the accrual accounting system, the company's profitability, assets and liabilities, and other financial information are more in line with economic reality

Accounting principles

If financial accounting is useful, the company's report needs to be credible, easy to understand, and comparable to other company reports. To this end, financial accounting serves as a set of general rules called accounting standards or generally accepted accounting principles (GAAP, declared as "gap").

GAAP is based on the basic principles and concepts of cost principle, matching principle, full disclosure, optimistic attention, economic entity, conservativeness, relevance, and reliability

Generally accepted accounting principles also involve specific industries, such as utilities, banking, and insurance, which may be unique accounting practices. These practices are usually a response to industry-government changes.

(FASB, pronounced "fas-bee"). FASB is a non-governmental organization, so this motion currently requires and formulates accounting rules to meet these needs

In addition to the following provisions of the General Accounting Standards, any listed company is also subject to the reporting requirements of the United States Securities and Exchange Commission (SEC) (a US government agency). As an annual report submitted to the SEC. The annual report submitted to the SEC requires an accredited certified public accountant to review the company’s financial statements to ensure that the company complies with generally accepted accounting standards.

Proof of income

Report income of the company's profitability during the specified period. The time period can be one year, one month, three months, thirteen weeks, or any other time interval selected by the company Custom Assignment Services.

The main components of the income statement are income, expenses, gains, and losses. Income includes sales, service income, and interest income. Expenses include the cost of sales, operating expenses (such as salary, rent, utility expenses, advertising expenses, and non-operating expenses (such as interest expenses)), and if the company's stock is listed, its common stock earnings per share are reported in the income statement.