The definition, objectives and career path of Financial Accounting

 

THE DEFINITION, OBJECTIVES AND CAREER PATH IN FINANCIAL ACCOUNTING

Introduction

Talking about financial accounting takes many students’ minds to only calculations. This makes most students become practically biased in their preparation towards examinations at various levels across the Globe. In contrast, most financial accounting examinations include a reasonable amount of theories.

At the W.A.S.S.C.E level, for instance, 30% marks, out of the total 100% is attributable to the theories. Students are therefore advised to take the theories of financial accounting as seriously as the other aspects.

Definition

Financial Accounting can be defined as the process of collecting, recording, evaluating, analyzing, summarizing and communicating financial transactions to users of accounting information to be used in taking economic decisions.

It can also be defined as the process of identifying, measuring and communicating economic information, to ensure informed judgments and decisions by users of the information.

Financial accounting records financial transactions between a business and outsiders (i.e.: it’s customers, suppliers, employees, owners or shareholders, management, government and its agencies, financial institutions, lenders, etc and prepares and presents Income Statement (Trading and Profit and Loss Account), Statement of Financial Position (Balance Sheet) and Statement of Cash Flow, at least once every year, to the interest holders of a business.

The main purpose of financial accounting is to provide information which will help show an organization’s financial performance (through the Income Statement); financial position (through the Statement of Financial Position) and changes in a financial position (through the Statement of Financial Position) to users.

OBJECTIVES OF FINANCIAL ACCOUNTING

Aside from the main purpose of financial accounting, there are other objectives. These include the following

1.      To provides information that helps to know the financial strength, weakness, opportunities, and threats to a business.

2.      To reveal the financial policies and methods used by business organizations

3.      To satisfy the legal regulatory requirements

4.      To provide important information about the resources of an organization

5.      To show relevant financial information about liabilities ("owings")  of a business organization

6.      To show the capital and changes in the capital of an organization

WHY ONE SHOULD STUDY FINANCIAL ACCOUNTING

(Future prospects for studying financial accounting)

The following are some of the several reasons why one should study accounting

1.      It helps one  to prepare financial statements

2.      It helps people to give interpretations to financial statements

3.      By studying accounting, one can become a financial analyst

4.      Adequate knowledge in accounting can let one become an auditor

5.      People can also become financial managers with accounting knowledge

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