Meaning of Financial Accounting
Financial accounting usually means the process of summarizing, assessing and then conducting an analysis in relation to the transactions of the company. The main purpose of preparing accounting assignment is to introduce the students about the income statement and balance sheet of the company. Financial Accounting is a type of accounting statement which is annually to know the profits and the financial position of the organisation. The financial statement of the organisation usually includes income statement, balance sheet and the cash flow statement.
There are different advantages of accounting statement which includes:
- Financial reports of a particular organisation are usually prepared by analysing the accounting statement. The assignment shows about the information in relation to the financial accounts. The assignment also conveys the information in relation to the cash flow analysis which helps in analysing the cash which is entering and exiting from the organisation. The balance sheet of the organisation helps in analysing financial position of the company.
- Accounting Statement of the organisation usually helps in assessing the functions of the accounting statements by keeping track of the different accounts of the company in the form of bills receivable and bills payable.
- Budget of an organisation is usually prepared with the help of the accounting statement. The assignment on the budgeting usually has some information about the organisation and thus helps in forecasting about the financial strength of the organisation.
- The accounting assignment helps in knowing the financial situation of the organisation which helps the shareholders and the investors in making decisions in relation to the investment n the shares of the company.
There are various disadvantages of accounting statement which include:
- The organisations usually inflate the margin of profit in order to attract the shareholders to invest in the organisation.
- The accounting assignment highlights about the various methods applied by the organisations in order to hide the expenses of the organisation. In the balance sheets there are various forms of liabilities which are hidden in order have a low debt/equity ratio.
There are three important accounting areas which include:
Profit and Loss statement
Profit and Loss Statement is the statement in which the financial position of the organisation is effectively prepared at a particular period of time. There are two different types of incomes which includes the Non-operating Income and the Operating incomes. In the income statement the net sales of the company usually comes under operating Income. The amount of the gross profit and net sales is equal which $62000 is around.
Cash Flow Statement
The cash flow statement usually helps in analysing the cash inflow and outflow in the organisation due to different operational and investment activities. In the cash flow statement there is inflow of cash in case of cash flow from operations as the amount is $ 4000 and there is cash outflow in case of cash flow from investing as the amount is -$1000 and financing activities as the amount is-$2000.
Balance Sheet is a statement which evaluates about the total assets and liabilities of the organisation at a particular point of time. A balance sheet is a statement in which the two sides of the balance sheet are equally balanced. The balance sheet shows that the amount of Accounts payable is around $20000 which is much more than the amount of accounts receivable that is around $10000.