Financial Accounting Essay

Submitted By cardinal72
Words: 314
Pages: 2

1. Financial Accounting is the process that culminates in the preparation of financial reports (balance sheets, income statements, cash flow statements, and shareholders equity statements) on the enterprise for use by both internal and external parties that include investors, creditors, managers, unions, and government agencies. In contrast managerial accounting is the process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, control, and evaluate a company's operations. This information is directed towards, line, division, and profit center reporting.
2. Financial Statements are the means that a company communicates its financial information to those outside it showing the company's history in monetary terms. In contrast, Financial reporting is an alternative means by which a company communicates its history in monetary terms. For example, president letter, prospectuses, and management forecasts.

The major objective of financial reporting is to provide information that is (1) useful in investment and credit decisions (2) useful in assessing cash flow prospects, and (3) enterprise resources, claims to those resources, and changes in them. #8 Its mandate is to establish accounting principles. It is a formulator and implementor of the standards. Most companies within their jurisdiction are required to file audited financial statements. It is interested in content, accuracy and credibility of the state. SEC has broad powers to prescribe accounting principles and standards to over 12, 000 companies that