Jul 18, 2022

Types of financial accounting

Types of financial accounting

Isn't accounting just accounting? Actually no, the truth is that the field of accounting is full of diversity, as there are multiple accounting types, accounting terms, and accounting systems, and you may wonder why you need to learn about the different types of accounting, and the best answer is that you may need to use one or more of them in the future, why not Take a few minutes and learn about these different accounting areas?

As a businessman, you must analyze the standing and health of your business and create financial statements, and to enhance this, you must resort to financial accounting, where accounting makes you record, classify, and summarize all transactions of economic importance to business, and financial accounting is often different from other types of accounting.

In its methodology, you have a method of documenting, summarizing and reporting, and this relates to all transactions that occur within business operations in a given period, and includes preparing accounts, including income statement and cash flow statement within it, these are the two most important elements of financial accounting.

The trial balance, which is usually prepared using the double-entry accounting system, forms the basis for preparing the financial statements, and all numbers in the trial balance are rearranged to prepare the profit and loss statement and balance sheet, and accounting standards define the format of these accounts (SSAP, FRS, IFRS).

The financial statements present the income and expenses of the company and a summary of the assets, liabilities, shareholders' equity or the owners' equity of the company on the date the accounts were prepared.

Financial Accounting Reports

Financial accounting reports are vital in understanding and recognizing the goals the company has set for the future as well as those from the past that have been achieved. They tell you how your company will operate, how many employees you can and should hire, as well as the additional resources you are likely to allocate to departments other in your company.

Financial Accounting Statement

The following are the terms used in the financial accounting statement:

income lists

This is the kind that calculates your net income. It does this by taking your revenue from your expenses, and the revenue is added back once a product is sold, or your customer confirms that a service has been completed.

balance sheet

This is prepared at the end of any period you may have to monitor for financial activity, usually every quarter or financial year, some companies also do this for a calendar year period depending on stakeholder requirements, the balance sheet determines what asset values ​​you have, and Derive this by adding the liabilities and equity that it owns.

Statement of retained earnings

This relates to the profits that the company pays to shareholders and the profits that you kept aside for later reinvestment in your business.

cash flow statement

This is your total capital and determines the amount of money going in and out of your business, and takes into account factors such as operating costs as well as financial and investment costs.

Accounting and Financial Accounting: What's the difference?

Although on the surface a lot of accounting looks the same, with regard to debit and credit, in reality they can be significantly different, and financial accounting differs because it deals only with the creation of statements that comply with generally accepted accounting principles (GAAP).

Accounting deals with various aspects of the finances and transactions of your company, and these may include salaries, inventory, debts and revenue, among other things. A combination of both, which is appropriate for a business, are cash accounting and accrual accounting.