What is financial accounting?

The definition of financial accounting is the branch of the accounting that is responsible for registering, classifying and reporting on the different operations valued in money carried out by an economic entity. Its objective is to collect the economic summary of a company. It is also called general or external accounting.

Through this information system it is possible to measure the evolution of wealth or assets, in addition to the results and income of a , through the recording of transactions carried out in economic activity. All this facilitates the preparation of the annual accounts.

Financial accounting is also necessary information to be presented before external agents who demand it for control or analysis.

Objectives of financial accounting

Financial accounting presents two basic objectives such as:

  • Accounting for the transactions carried out by the company, constituting a the memory economically in the company.
  • Report on the financial-economic situation of the entity, as well as the benefits achieved and the profits. In some way it tries to show the heritage of the company.

Characteristics of financial accounting

To understand the concept of financial accounting a little better, you should also know what its main characteristics are.

  • It is necessary to implement it in a company to properly report the facts developed.
  • It allows to present reports or accounting documents to third parties on the financial movements of the business.
  • It satisfies the entirety of the company's operations chronologically and historically.
  • Due to its obligatory nature, it is used as something frequent in the business environment.
  • It is based on the accounting principles and procedures for the recording of financial operations Of a company.

With all this, the main mission of financial accounting is to provide useful information for making economic decisions, where equity and different economic movements are analyzed.

Types of accounting

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