The Importance of Financial Accounting
Posted on Mar 23, 2021 at 04:03 PM
Financial Accounting is a branch of accounting that records all matters related to financial position, financial performance (income statement), and cash flows of the enterprise in accordance with certain accounting standards. Here is the importance of financial accounting for all parties concerned with the institution, which will be explained in detail below.
What are the Functions of Financial Accounting?
These functions are:
- Identifying, processing and processing financial transactions, such as sales, purchase, payment, and service delivery.
- Measuring the financial value of those operations: ie knowing the value of cash corresponding to each of those operations separately.
- Recording results: Any documentation of all that has been identified and measured in accounting records, taking into account accuracy ,and history.
- Delivery of results: the most recent and important function of financial accounting functions, which means summarizing results previously recorded in the form of financial statements accompanied by analysis that decision-makers can use to make sound decisions.
Characteristics of Financial Accounting
Financial accounting is characterized by a set of characteristics that can be used to achieve the desired benefit to the fullest, and these are summarized in the following:
- Timeliness: any information, data, and figures must be up-to-date and ready to be presented to beneficiaries.
- Clarity: which is clear and analytical to the extent that beneficiaries can predict what the financial situation will be in the coming period.
- Objectivity: any financial accountant to document his information and figures, without any personal intervention or manipulation in his favour or for the benefit of any beneficiary.
- Comparability: that is to document all financial transactions accurately and systematically so that the beneficiary was able to quickly compare between any two different periods in the history of the work of the institution.
Beneficiaries of Financial Accounting
- Management of the Institution: The management of the institution is interested in the financial reports to see the success of the institution, and make decisions on how to manage that institution during the coming period.
- The Owner of the Institution: These reports help the owner of the institution to verify the success of the current management of the institution.
- The current investor and the potential: to be able to predict the return that will come back to him by investing his money in this institution.
- Creditors: to reassure the extent to which the institution repays its receivables on time.
- Government Agencies: such as the Tax Authority, to determine the state dues accurately before collection.
The primary goal of any business or industry is to make a profit. And accounting is the one that says this company or the institution made a profit or not, from here the importance of accounting has emerged, because it deals with the main objective of any legal entity. You may learn more about accounting by visiting finance and budgeting training courses in London page and enroll in one of our courses.
