Financial accounting is the process of recording, summarizing and reporting a company’s business transactions through financial statements. These statements are: the income statement, the balance sheet, the cash flow statement and the statement of retained earnings.
What Is the Difference Between Accounting and Financial Accounting?
“Accounting” encompasses all of a company’s financial transactions. A well managed accounting department will have set policies and procedures for expenses, data management and the generation of financial reports.
Financial accounting is concerned specifically with the generation of these reports, that they are based on accurate information and follow “Generally Accepted Accounting Principles” (otherwise known as GAAP). GAAP sets accounting standards in the United States for a wide array of topics, including financial statement presentation.
