The Importance of Financial Accounting

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The Importance of Financial Accounting
Introduction
According to Weygandt, Kieso and Kimmel (2012), financial accounting is identifying, recording and communicating the economic events of an organization to, mainly, external users. Through financial accounting, some financial reports will be generated. Four financial statements are frequently used to report and analyze the financial status of companies and they are Income statement, Retained Earning Statement, Statement of Financial Position and Statement of Cash Flow. These financial statements can always give useful information to users. The objectives and roles of financial accounting

The Financial Accounting Standards Board, known as FASB, (1978, 1980, as cited in Nicholas & Shyam, 1980, p.1) stated the major objective of financial accounting is “to provide useful information for decision-making”. It gives the foundation to users to plan, control and make decision with great assistance, for instance, internal users like managers need the information about profit or loss, return, cash on hands, budget and the like. Also, external users have little authority to access the information so they rely on financial statements to know about the economic resources, financial position, earning power and the like. Others objectives includes recording business transactions so that the daily operations can be marked to reduce error, calculating net income or net loss to reveal the performance of companies and effect of the decisions made, and illustrating financial position to know whether the company is more advanced when comparing to other organizations. To achieve the above objectives, financial accounting has a number of roles. Firstly, it acts as a quantitative financial information provider that communicates with the stakeholders and assists the users to make better decisions. It also acts as data handler. It identifies, classifies and summarizes the data into financial reports and statements to...
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