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It is the study of accounting, which involves the preparation of financial statements for users such as stockholders, suppliers, banks, employees, customers etc.
Financial statements are prepared for internal as well as external users. In other words, financial accounting is the process of summarizing the financial data of an organization.
Objectives of Financial Accounting
It is the process of collecting, summarizing and evaluating an alternative course of action that helps in minimizing the overall capital cost. It advises a management about an alternative course of action that is based on cost efficiency. It provides detailed information that is used by a management to control its operations and costs.
It includes various topics:
To know the difference between cost accounting and financial accounting, visit the following link:
It is often referred as management accounting and it involves summarizing, interpreting and evaluating financial information from the point of view of a management. It is related to providing accounting information to a management. It aims at helping a management in its decision-making activities. It supports decisions through planning and controlling operations. Controlling is done when managers compare the actual performance with the budgeted amount to identify the loop holes in the internal control.
Areas of Comparison
Managers, employees, supply-chain partners
Owners or stockholders, lenders, customers, governmental agencies
Flexible, driven by user’s needs
Based on generally accepted accounting principles
Purpose of reports
Provide information for planning, control, performance measurement, and decision making
Report on past performance
Nature of information
Objective and verifiable for decision making; more subjective for planning (relies on estimates); confidential and private
Objective and verifiable; publicly available
Units of measure
Monetary at historical or current market or projected values; physical measures of time or number of objects
Monetary at historical and current market values
Frequency of reports
Prepared as needed; may or may not be on a periodic basis
Prepared on a periodic basis
Find below an illustrative list of topics which are covered at Experts land-
Future Value of Money
Activity Based Costing
Present Value of Annuity
Break Even Analysis
Cost of Goods Sold
Cash Flow Statement
Chart of Accounts
Basic EPS and Diluted EPS
Operating and Cash Cycle
Our experts have answered many a question pertaining to the list above (and on several other topics). Some of the questions they have answered are as follows:
Q. I have a turnover of $ 500,000. My wife is a CPA and she is managing the accounts of my firm. However, my friend says that I should appoint some other CPA. Can anyone please tell me what should I do now?
Q. How can I build a supply chain in my organization? I am running a shoe manufacturing business. I have 50 employees in my factory and 5 huge machines; every month I pay $10,000 for quality check which is of no use as it takes 5 people who spend the entire day for checking the quality of the shoes that have been produced. I want to establish a system of merchandising wherein I do not need so many employees to check the quality of the goods that are manufactured by us.
Q. I am running a saloon and i am a bit confused about book keeping. I want to know about the dates that I need to enter into the accounts so that I could record a transaction. For example, if i have received $150 in cash and $200 in cards on the 10th of October andthe credit for the cards is transferred to my bank on the 15th, which date shall i enter for sales ?
Q. My question is - As a sole proprietor, how shall I pay money to my friends & relatives as they are working with me without any contract. Shall I make a contract with retrospective effect?
Q. I believe that in most situations, a trial balance needs to be prepared. However, what other statements or reports will a client or an accountant require from a 'basic book keeping expert '? I can think of bank reconciliation statement and other such things. Am I missing something important?
Q. I need help on transfer pricing; I am situated in the US and have recently opened up a subsidiary in Japan. What is the transfer pricing provision in case I transfer raw material and machines to them? Do I need to take the help of a CPA?
Q. With multiple offices, how can I consolidate data with the Peach Tree Accounting software?
Q. I am in the middle of an entry; I want to create a new account for accounts payable. What is the shortcut for creating a new account in Myob Software?
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