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importance of financial accounting

Financial Accounting

Financial accounting is one of the branches of accounting science, and this branch of accounting science includes a set of periodic procedures, the most prominent of which is the recording, tabulation, and analysis of financial operations related to the activity of the facility during a specific period of time. The financial accountant records it and measures its impact. Through the work of the accountant during the fiscal year, he prepares what is known as the annual financial statement, which includes the preparation of financial statements that provide many accounting information. In this article, information on the importance of financial accounting will be addressed.
importance of financial accounting
importance of financial accounting

importance of financial accounting

importance of financial accounting appears through a set of procedures that the financial accountant implements periodically to reflect their impact on all parties concerned with the organization’s activity, both internally and externally. The importance of financial accounting can be demonstrated through the following:

Regulating and recording the facility's activities

It is the primary function of the financial accountant, as he records all financial operations to reflect their impact on the financial period in which these operations occurred, and this ensures that there are no unrestricted activities in accounting, which have an impact on the company’s accounts in terms of return or cost, all operations are recorded for the purposes of controlling expenses Determining actual profits or losses.

External evaluation of the organization's activity

There are some external parties that are provided with accurate financial information through which the general situation of the organization is evaluated, and the most important of these external parties are investors and shareholders whose financial statements provided by the financial accountant help them to give them indications of the organization’s investment security in the coming financial years, according to the numbers contained in the lists Financial information or scaling the investment amount because there is a lower degree of investment security due to the financial situation of the organization, and this is also related to customers whose financial information may guide them to safety in major purchases, in addition to the suppliers’ benefiting from financial information to know the organization’s ability to pay and the extent of the possibility of expansion in the supply of goods and services to this organization or its control.

The internal evaluation of the organization's activity

Where the organization’s management is concerned with the financial information issued in the annual financial statements to know the size of the growth that is being achieved financially and economically, in addition to studying the aspects of the fiscal deficit or weakness in order to research the reasons that led to this happening and to set the policies by which the organization’s path is corrected and losses are overcome actual or potential occurrence.

Financial Statements

Financial information is presented to related parties through a financial statement that includes a set of financial statements issued by the financial accountant in the organization in accordance with generally accepted accounting principles. specific, these lists are:
  • income list.
  • Statement of financial position.
  • Balance Sheet.
  • Statement of Cash Flows.
  • Shareholders' Equity Statement.
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