• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Explain the major role and objectives of financial accounting.

Extracts from this document...


´╗┐The world of financial accounting Company nowadays is divided into a number of departments such as human resource management division, accounting division. Each department specializes in different work task in order to facilitate normal operations fluently. For everyday operation, the enterprise generates revenue as well as expense. Thus, it is the accountant?s responsibility for handling the company?s financial data so as to generate financial information about the business performance and its economic position. Also, the main objective of an enterprise is to maximize profit and minimize the cost. For this purpose, it is of paramount importance for the company to have accounting division. In the following essay, the present writer will explain the major role and objectives of financial accounting and other aspects related to financial accounting in detail. First of all, basically, the role of financial accounting is to gather and summarize financial information so as to generate financial reports and statements such as income statement, retained earnings statement, financial position for the users outside the company (external users), for instance, the government, investors, employees, analysts, suppliers, lenders, customers and the public on a periodic basis. ...read more.


employees such as existing, potential and past employees, creditors such as existing and potential holders of debentures and loan stock, government such as tax authorities, departments and agencies concerned with the supervision of commerce and the public such as taxpayers, ratepayers, consumers, special interest groups. These external users have the need of obtaining the enterprise?s financial information in order to distinguish the strengths and weaknesses of the business for better decision making. The above claims have generally stated the nature and function of financial accounting .Now we have to jump to another question of whether the financial market needs financial reporting or statement. First of all, we should have a basic understanding of what is financial market. A financial market is a market in which there is a trading and exchange process of financial assets. Also, a financial market can facilitate borrowing and lending since it can allow the transfer of funds from one agent to another. A financial market can act as collectors and aggregators of information about financial asset values and the flow of funds from lenders to borrowers. ...read more.


The financial statements are historical reports presented in money terms based on rules in order to make the reports as consistent and comparable as possible from one company to another. As a result, by generating historical financial statements which are consistent, comparable and timely, financial accounting can therefore assist in efficient and effective resources allocation. The external users can then make informed financial decisions to decide which companies to invest their limited capital resources. In this sense, financial statements can reduce information cost and make the allocation of capital resources more efficiently. On the contrary, without the historical financial statements which are comparable, consistent and timely, the external users would have difficult in making the best investment decision since they do not have enough information to assist them in decision making. As it turns out, the resource allocation would become very inefficient and time-consuming and raise their risk in investment decision enormously. All in all, by having a deep analysis above, the financial market has the need for financial accounting and it is useful for the users to make financial decision and plays the role in allocating the resources efficiently. (1188 words) Reference : http://accountingexplained.com/financial/introduction/ http://en.wikipedia.org/wiki/Financial_accountancy http://www.ehow.com/info_8131759_objectives-financial-accounting.html http://www.accountingtools.com/questions-and-answers/what-is-relevance-in-accounting.html http://dilipchandra12.hubpages.com/hub/Role-of-Accounting http://www.mcgraw-hill.co.uk/he/chapters/0077108086.pdf http://www2.econ.iastate.edu/tesfatsi/finintro.htm http://www.ehow.com/facts_7849375_accounting-capital-allocation-process.html ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our University Degree Accounting section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related University Degree Accounting essays

  1. An Analysis Of harmonization issues of accounting standards

    Elizabeth, E and Healy (2000) had pointed by analyzing the samples taken during 1993-1997, that to explain the future cash flow and the Return of Capitals. It is much easier to apply CAS. Also it has been pointed that to use IAS/IFRS in China will be meaningless.

  2. Sample Accounting Report Writing

    The stock turnover continues to increase from 94.81 days in 2004 to 107.99 days in 2005. Comparing 2004 and 2005, there was an increase in the cost of goods sold and stock. Therefore, there is a fall in stock turnover from 3.85 times per year to 3.38 times per year.

  1. The Importance of Communication in Accounting. Todays accountant, especially within the managerial accounting realm, ...

    such as "asset value" and "price" across various global jurisdictions, will be considered and managed in a uniform way.

  2. Working Capital Management

    14.4.1 Debtors' Turnover Ratio Debtors turnover ratio = Credit Sales / Average (Debtors + Receivables) This ratio measures how rapidly receivables are collected. A high ratio is indicative of shorter time-lag between credit sales and cash collection. A low ratio shows that debts are not being collected rapidly.

  1. This is the financial report on the PepsiCo, Inc. In the following report we ...

    all types consumed worldwide every day, beverages bearing the trademarks owned by or licensed to Coca-Cola account for approximately 1.3 billion. Of these, beverages bearing the trademark "Coca-Cola" or "Coke" accounted for approximately 55% of the Company's total gallon sales.

  2. Financial statement analysis

    XIV. RECOMMENDATIONS Long-Term Investment: Colorado Group Ltd. From the preceding analysis, Colorado is recommended for medium to long term investment. Colorado's management focus on deriving better margins from increased internal efficiencies and demonstrated willingness to invest in operations will suit investors well over periods of downturn. Colorado's stable of attractive brands, investment in building brand equity and

  1. A Comparision of Financial and Management Accounting.

    models Accounts receivables Incremental analysis inventory EOQ models, safety stock models Fixed assets Incremental analysis, capital budgeting * Income statement Sales CVP analysis, segmental reporting, incremental analysis Expenses CVP analysis, incremental analysis Net income Direct costing The management accounting tools for each financial statement item (Management-Accounting And Decision Making,2012).

  2. Accounting Assignment on Financial statements

    is also show in the statement of financial position. 1. Current assets These assets value will change frequently with the routine transactions. Current assets includes Closing Inventory/Stock, trade receivables (debtors), prepaid expenses, accrued income, cash at bank (favourable) and cash in hand.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work