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Explain the major role and objectives of financial accounting.

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Introduction

´╗┐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.

Middle

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.

Conclusion

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.

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