We explain what financial accounting is, its requirements and objectives. In addition, what is fiscal and administrative accounting.
What is financial accounting?
A branch of accounting specifically dedicated to the financial transactions of a business is called financial accounting . This implies summarizing, analyzing and informing the general public as well as the shareholders of a company or the government agencies dedicated to fiscal supervision, and based on this information, strategic decisions are usually taken within the organization.
Financial accounting is responsible for keeping track of the economic history of any organization , and together with cost accounting and administrative accounting, it forms the accounting structure of the organization. As consumers of this information tend to be external entities to the organization, it is also known as external accounting .
This branch of accounting is governed by national and international standards enshrined in the financial laws of countries or regions. To that extent, you must meet the following requirements:
- Relevance . The information gathered must be relevant for decision-making, since there is no other reason to undertake this type of study. The reports are expected to get to the point and be as complete as possible.
- Materiality . The information contained in these reports is considered material when it can substantially influence the benefit or damage of real economic actors of the company .
- Reliability . Every accounting exercise must be true, free of errors or biases that may alter its content.
- Understandable . Any accounting information must be readable by your target audience and cannot have airtight passwords or languages.
- Comparable . The accounting reports can be collated to obtain an evaluation of different periods and obtain conclusions regarding the performance of the company.
Objectives of financial accounting
Financial accounting pursues the following objectives:
- Offer true and useful information about the financial situation of a company and the profit obtained by it.
- Create business economic report recording the operations carried out by the organization.
- Provide information regarding the operating results, financial position and cash flows of a company.
Fiscal accounting is responsible for monitoring and recording the operations of a company with respect to its tax obligations , based on the obligations contracted by any company according to the legal and legal framework in force in a nation.
Thus, the criteria of fiscal accounting will vary depending on where the company operates, but it is always of great importance for the preservation of corporate assets as well as its public image, since irresponsible management of its taxes could be highly counterproductive.
This is a branch of accounting that keeps the administration of the company informed , that is, its management, regarding the financial situation of the organization and the recording of its economic movements.
That is why it is known as managerial accounting, since it prioritizes the usefulness of your information to allow management decisions as accurate and informed as possible.
Together with cost accounting and financial accounting, the administrative structure forms the accounting structure within any company or organization.