Description

Financial accounting is a branch of accounting concerned with the summary, analysis and reporting of financial transactions related to a business. This involves the preparation of financial statements available for public use. Stockholders, suppliers, banks, employees, government agencies, business owners, and other stakeholders are examples of people interested in receiving such information for decision making purposes. Financial accounting is a specific branch of accounting involving a process of recording, summarizing, and reporting the myriad of transactions resulting from business operations over a period of time. These transactions are summarized in the preparation of financial statements, including the balance sheet, income statement and cash flow statement, that record the company's operating performance over a specified period. Financial reporting occurs through the use of financial statements such as the balance sheet, income statement, statement of cash flow, and statement of changes in shareholder equity. Financial accounting differs from managerial (or cost) accounting as financial reporting is more for reporting to external parties while cost accounting is more for strategic planning internally. Financial accounting may be performed under the accrual method (recording expenses for items that have not yet been paid) or under the cash method (only cash transactions are recorded). Financial analysis is used to evaluate economic trends, set financial policy, build long-term plans for business activity, and identify projects or companies for investment. This is done through the synthesis of financial numbers and data. A financial analyst will thoroughly examine a company's financial statementsóthe income statement, balance sheet, and cash flow statement. Financial analysis can be conducted in both corporate finance and investment finance settings. Designed for students taking a step beyond their introductory financial accounting training, the book equips them with all the key tools they will require when they enter professional practice.