Financial accounting is the process of preparing financial statements that companies’ use to show their financial performance and position to people outside the company, Including investors, creditors, suppliers, and customers.This is one of the most important distinctions from managerial accounting, which by contrast,involves preparing detailed reports and forecasts for managers inside the company.

Objectives of Financial Accounting

Most companies are required to prepare and make available quarterly and annual financial statements to shareholders and the investing public. There are four basic financial statements used in the corporate world to show a company’s financial performance:

• The income statement (also called the profit and loss statement) covers a specific period of time (such as a quarter or a year).

On an income statement, Revenues – Expenses = Net Income.

• The balance sheet is a statement of assets and liabilities at the end of an accounting period. In other words, the balance sheet is a financial snapshot at a specific point in time.

On a balance sheet, Assets = Liabilities + Stockholders’ Equity.

Stockholders’ equity is the amount of financing provided by operations (retained earnings not distributed to stockholders) and by stockholders who reinvest through contributed capital.

•  The cash flow statement shows the actual flow of cash into and out of a company over a specific period of time, in contrast to the net income on the income statement, which is a non-cash number.

A cash flow statement shows cash flows from operating activities, investing activities, and financing activities.

•  The statement of retained earnings covers a specific period of time and shows the dividends paid from earnings to shareholders and the earnings kept by the company.

• Notes to financial statements provide additional information about the financial condition of a company. The three types of notes describe accounting rules used to produce the statements, give more detail about an item on the financial statements, and supply more information about an item not on the statements.

Preparation of the following statements/ reports (Monthly, Quarterly, Half yearly and Annual) and discussing the issues with the higher management and giving valuable and effective recommendations:

• Trail Balance.
• Statement of Financial Position.
• Statement of Comprehensive Income.
• Statement of change in Equity.
• Statement of Cash Flow.
• Notes to the Accounts.