What is the role of financial accounting?


What is the role of financial accounting?

Financial Accounting:

Accounting provides information to users of the organization. Users can be external to the organization or internal to the organization. Transactions are entered into the accounting system by posting journal entries to the general ledger.

Answer and Explanation:

The role of financial accounting is to provide information to external users of the organization. External users are those who are not involved in the day to day operations of the company such as creditors and investors. They must make business decisions off of the information provided to them. Financial accounting provides financial statements to external users by applying Generally Accepted Accounting Principles (GAAP), which are the rules that accountants must follow when preparing financial statements. The financial statements include the income statement, balance sheet, statement of cash flows, and notes.

Learn more about this topic:

Role of Financial Accounting in Management & Decision Making

from Accounting 201: Intermediate Accounting I

Chapter 12 / Lesson 1

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