Financial Accounting and Reporting (FAR) monitors all Education and General Funds, Designated Funds, Restricted Funds, Agency Funds and Auxiliary Funds.
“Financial Accounting” is specifically concerned with generating all external statements, balance sheets and stockholders’ equities, encompassing all of a company’s financial transactions.
“Financial Reporting” is surveying of this information.
In addition, Financial Accounting is a specific aspect of accounting. It involves recording, summarising and reporting the large volume of transactions resulting from a business trading over time.
What Are the Four Basic Financial Statements?
Balance sheet, income statement (profit and loss statement), cash flow statement, and the statement of owner’s equity.
The entire purpose of financial accounting is the preparation of financial statements.
They communicate crucial information to four key audiences:
Investors: Investors often seek financial reports before investing in a company.
Shareholders: Shareholders have a stake in a company, so they need to understand its performance.
Management: Financial statements tell company managers how well the company is performing and what is working well and what is not.
Banks: Lenders or other financial institutions will most certainly require financial statements during a lending process.
Financial Accounting is Required By Law
Statements, including balance sheets, income statements and cash flow statements, are legally required for registered companies and included in a company’s annual report as a rule of thumb.
Why Do Financial Accounting and Reporting Matter?
Businesses require stability and consistency. Many things related to business go hand in hand.
Financial accounting is a way for businesses to keep track of their operations and provides a picture of their financial health.
Reporting provides insight and transparency into a business’s financial position and operations, allowing them to make better-informed decisions.
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