Major Aspects of Financial Accounting

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Major Aspects of Financial Accounting
Accounting is one of the most important processes in the business world. Later in this essay, different aspects related to financial accounting such as its objectives and roles, and its users shall be discussed. The main objective of financial accounting is to record business transactions or economic events in sequence in a systematic way. The information collected is then communicated in the forms of various financial statements or accounting reports. Accounting consists of three basic activities – it identifies, records and communicates the economic events of an organization to interested users. (Jerry, J. & Paul, D. & Donald, E. 2012) Financial accounting plays the role of information provider to decision makers. In order for the communication of relevant information to be efficient and comprehensible for most users, a standardized system for the exchange of information is necessary. This is when financial accounting serves one of its greatest purposes. Decision makers in the business world have to analyze the relevant accounting information by utilizing some accounting principles in order to judge the financial position of a company or to gain a better understanding on how the company allocates its resources. Since the procedures and methods of financial accounting have been modified and standardized, accountants can easily understand and obtain the information desirable. They then can make rational decisions based on their analysis. After revealing the main objectives, it is clear that “relevant information” consist of a very important part of financial accounting. One of the main focuses of financial accounting is to provide users with relevant information for decision making. But still, the definition of relevant information seems to be ambiguous. In the following paragraph, further details and explanation of this term shall be disclosed. Due to the ever-changing character of business, it is not an easy task...
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