i) What is 'Financial Accounting'? Explain in brief the Scope of Financial Accounting.
Answers
Answer:
Financial accounting is the field of accounting concerned with the summary, analysis and reporting of financial transactions related to a business.
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What is financial accounting ?
- Financial accounting is a particular type of accounting that includes a method of documenting, summarising, and reporting the transactions arising from business operations for a period of time.
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★ It reflects two types of accounting :
- Accrual basis of accounting
- Cash basis of accounting
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Scope of Financial Accounting
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- Records Financial Transactions
→ Financial accounting record each and every financial transaction taking place in the business organisation.
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⠀⠀2. Classify And Summarize Information
→ Information collected and recorded by financial accounting is properly categorized according to their nature.
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⠀⠀3. Prepares Financial Statements
→ Financial accounting prepares financial statements like cash flow statement, income statement, balance sheet etc.
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⠀⠀4. Interprets Financial Information
→ Financial accounting interprets information from several analysis conducted and financial statements prepared.
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⠀⠀5. Communicates All Outcomes
→ Financial accounting serves the needs of all external stakeholders by delivering them true and accurate picture of the company’s financial affairs.
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