Financial Accounting
Financial accounting is a type of accounting that relies on the use of money as a means to assess and measure economic performance, rather than relying on production. revenues, obligations, and expenses.
Financial accounting is defined as the process by which a group of financial transactions that result from commercial operations during a period of time are summarized and recorded, and these transactions are summarized based on the preparation of financial statements for them, and includes the use of financial statements, such as the income statement and the balance sheet. From the definitions. The other for financial accounting is accounting, which is concerned with providing financial reports about profits, cash flows, and private debts in companies; Which contributes to providing a measurement tool for investors and banks; In order to monitor the performance of companies.
The development of financial accounting
Many organizations and private federations in accounting have been interested in following up on the development of financial accounting, which contributed to the issuance of many research and studies that led to the formation of the theoretical framework for the development of financial accounting. Over time, the most important ones are:
Educational and technical factors: are the influences resulting from technical and scientific progress in all societies, and have contributed to an important and influential role on the accounting system in various establishments; There was a direct relationship between the educational level, professional training, and the level of application of accounting systems in establishments. The presence of specialists in the various fields of accounting led to the development of the accounting work, and made it affect the management of various establishments, and also contributed to providing the possibility of using economic resources in the best possible way; By setting estimated financial budgets to be used as a control tool, and ensuring the application of financial analysis methods with the participation of financial accounting.
Social factors: are a set of social relationships and habits that have influenced the accounting systems prevailing in societies; In terms of the level of prudence and caution within society, and the nature of social feeling towards the field of accounting work, in addition to sharing the impact of a group of other factors on accounting, namely political, economic, and legal factors.
The importance of financial accounting
Financial accounting is of great importance in establishments of all kinds; Because it contributes to achieving many benefits, the most important of which are:
Assisting in measuring the possibility of providing jobs for individuals, and evaluating the wages offered to them.
Participate in enabling individuals in general to assess the financial condition of establishments.
Enhancing investments in light of the political, social, and environmental conditions surrounding the establishments.
Providing assistance to governments in calculating the value added tax, taxes levied on various companies, and other financial matters.
Contribute to the analysis of private investment in institutions and individuals; In order to make a comparison between past and future performance.
Providing information supporting the decision-making process for all operations.
prevent fraudulent activities; By providing all information related to assets, revenues, and liabilities.
Beneficiaries of financial accounting
A group of individuals benefit from financial accounting within establishments, including:
Investors, whether they are current or new, financial accounting helps them assess the risks of investments that link them with facilities.
Loan holders within the capital who follow the mechanism of obtaining their money on its due dates.
customers and suppliers; So that they can determine the expected period of time for the establishment to continue its operation.
Governmental institutions; Such as the tax authority that monitors the tax status of the facility.
personnel in establishments; In order to anticipate the length of time they will continue their work.
Financial Accounting Statements
Accounting generally depends on the presence of financial statements that contribute to the preparation of financial reports, and they are divided into three basic financial statements:
The balance sheet is one of the main financial statements, also called the statement of financial position, and it contains information about the financial wealth of the company, the value of assets, liabilities, and private equity of shareholders. The balance sheet depends on achieving a major accounting equation (Assets = Liabilities + Equity of shareholders); It is not possible to know the value of the company's assets except when determining the property rights and the resulting obligations, and thus the balance sheet contributes to reflecting the direct relationship between these operations, and is a summary of the company's accounts at the end of the accounting financial period.
income statement A list that provides information about the percentage of the company's own financial revenue during a certain period of time, specifying the amount of expenses and expenses that are directly related to the financial revenue. money not expected to be collected from sales; due to its depreciation, and also the value of expenses incurred in the cost of sales is deducted from the net revenue; Which leads to reaching the gross profit, and then the operating expenses are subtracted, and this results in obtaining the value of the operating profits, and the expenses incurred on the income tax, and the net profit or loss is included as a special key point in the income statement, after deducting the expenses incurred on taxes and interest.
The cash flow statement is the list that is concerned with following up the cash flows during the accounting period, and contributes to highlighting the financial statements related to the net increase and decrease in the total cash values available during the accounting period. The cash flow statement is divided into a group of various sections, and it includes operating activities, financing, and investment. The information in this list clarifies all the details related to changes at the level of special operations in achieving net profits or losses, as contained in the income statement.