Introduction to Financial Accounting

Summary:

Chapter 1 introduces financial accounting and defines various terms related to the field. Accounting consolidates financial information to provide clear and understandable data to stakeholders and shareholders, facilitating better decision-making. It involves preparing accounting reports, such as financial statements, and analyzing and interpreting them. Financial accounting provides information to external parties outside the business and involves the preparation of public-use financial statements. External users include lenders, shareholders, boards of directors, auditors, employees, regulators, etc. Internal users, such as managerial accounting, are directly involved in managing and operating the organization, and they use accounting information for decision-making within the business. There are diverse opportunities in accounting, with jobs in private accounting, public accounting, and government agencies. Accounting specialists are highly valued, and their skills are in demand for various financial and strategic roles. Different certifications like CPA, CPP, PFS, CFE, and CrFA can enhance career prospects for accountants.

Excerpt:

Introduction to Financial Accounting

Chapter 1: Introducing Financial Accounting

Definition of Terms:

• Accounting is a term that describes the process of consolidating financial information to make it clear and understandable for all stakeholders and shareholders. The main goal of accounting is to record and report a company’s financial transactions, financial performance, and cash flows. Accounting is the language of business because all organizations set up an accounting information system to communicate data to help people make better decisions.
• Communicating means preparing accounting reports, such as financial statements, and analyzing and interpreting these reports.
• Financial Accounting is concerned with providing useful information to those parties OUTSIDE of the business. Financial accounting is the field 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.
• Identifying means selecting transactions and events relevant to an organization.
• Management Accounting provides information for decision-making activities of management within the business.
• Recordkeeping/Bookkeeping is recording transactions and events, either manually or electronically, of an organization’s day-to-day activities. Recordkeeping is only ONE part of accounting.