Wize University Introduction to Financial Accounting Textbook > Introduction to Financial Accounting
What is Financial Accounting?
Popular Courses
COMM 217
Concordia University
ACCT 2301
The University of Texas at Dallas
Intro to Financial Accounting
General Course
COMM 293
University of British Columbia
Intro to Financial Accounting
University Study Guides
MGCR 211
McGill University
ACCT 1220
University of Guelph
Intro to Financial Accounting
University Study Guides
ACCT 217
University of Calgary
ADMS 2500
York University
COMMERCE 1AA3
McMaster University
ACCTG 211
University of Alberta
ACC 100
Toronto Metropolitan University
COMM 111
Queen's University
ADM 1340
University of Ottawa
BU127
Wilfrid Laurier University
RSM219H1
University of Toronto
COMM 1101
Dalhousie University
AFM 101
University of Waterloo
ACTG 2010
York University
0:00 / 0:00
What is Financial Accounting?
Financial accounting is one of the three major branches of accounting, the others being managerial accounting and tax accounting. The primary purpose of financial accounting it to provide financial information about the business to external users.
The Purpose of Financial Accounting
- Analyze, measure and record financial activities.
- Report financial activities to external decision makers.
- Owners
- Creditors
- Tax authorities
The Four Basic Financial Statements
Statement of Financial Position (Balance Sheet)
- Reports assets, liabilities and shareholders’ equity (financial position).
- Information pertains to a specific point in time (snapshot)
Statement of Earnings (Income Statement)
- Reports revenues, expenses and net income (profit)
- Information pertains to a time period (month, quarter, year)
Statement of Changes in Equity
- Reports all changes to shareholders’ equity accounts.
- Information pertains to a time period (month, quarter, year)
Cash Flow Statement
- Reports the inflows and outflows of cash that are related to operating, investing, and financing activities.
- Operating activities: Directly related to generating earnings
- Investing activities: Acquisitions or sales of the company’s fixed assets or investments
- Financing activities: Directly related to the financing of the company, includes payments and collections from investors or creditors (banks)