Financial accounting provides information to users outside the company with none to limited access to a company’s confidential records. These users include shareholders, creditors, employees, unions, tax authorities and other government regulators.
Role of Financial Accounting
Financial accounting collates and summarises financial data and helps develop and prepare key financial statements such as the income statement, cash flow statement and balance sheet, making interpreting business performance easy.
Financial accounting information must be accurately recorded and consistent using the accounting standards i.e. IFRS/GAAP.
Financial accounting shape a basic set of financial system controls for an entitiy’s business. Accurate financial records demonstrate sound financial controls and oversight that reduce the risk of theft and fraud.
Financial accounting can help develop financial ratios useful to analyse the various aspects of a business.
Financial accounting helps business owners to formulate their future course of action or business strategy and measure the success of this strategy with the financial information produced from earlier or another period.