USES OF FINANCIAL ACCOUNTING
Accounting has been called the language of business and is used in many different situations. Cost accounting is used to streamline manufacturing operations. Managerial accounting is used to compile data necessary for sound management decisions. Financial accounting is used to report the financial result of a company's operations. Public companies are required to report their results to the public, while private companies report to their owners. In either case, accounting creates financial statements for analysis.
Income Statement * Financial accounting is used to report the outcome of business operations in summary form. To do this, the accounting department uses financial accounting techniques to create an income statement. The income statement is also called the profit and loss statement. As the name indicates, this reports whether the company had a profit or a loss over a given period of time. Public companies report and publish their income statements with the Securities and Exchange Commission. Private companies perform the same procedures but they do not publish the outcome.
Balance Sheet * Financial accounting is also used to determine a company's financial position for a specific period in time. This process is repeated monthly, quarterly and annually. The accounting department creates a balance sheet, which provides the financial position of the company at a given time. The balance sheet