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Financial Accounting

Accounting is a methodology by which the financial information of a company is registered,

classified, classified and communicated. This information will be useful to make decisions. But

in the accounts there are types of this, since the companies there are different users with different

needs for information, for example: employees, investors, creditors, suppliers, trade unions, tax

authorities, etc. Each of them have different interests, and in response to this information there

are several types of accounting, administrative, and financial costs, which will be in the focus for

the time being.

The Financial Accounting generates information for general users of the organization, through

reports such as balance sheets, financial situation or state of results, for example. These will help

to make decisions in order to optimize the resources of the company. These states contain past

events or historical numbers, which help the company in the investment, financing and operation.

The states provide items such as: solvency, liquidity, profitability, operational efficiency and

financial risks.

"People are not successful makes decisions based on your current situation, successful people

makes decisions based on where they want to be." (Anonymous). At present, the financial

manager makes decisions on a daily basis on the action to be taken by the undertaking and you

must have the necessary tools that allow you to make the best possible decisions. There is a

diversity of tools for the taking of decisions, however, in the present document analyzes the

financial accounting subsystem.

To understand it better, the following definitions. Alcarria (2008) argues that it is the area of

accounting that aims to prepare and develop accounting information for external users. Such

information is subject to external regulation to the company (the state, professional

organizations, etc.).

Mallo and Polishing (2008) explain that it is an information system that allows us to measure

the evolution of the heritage or wealth and the results or regular income of the company, through

the systematic recording of transactions in financial and economic activity, which leads to the

development of the Annual accounts, prepared in accordance with accounting principles and

valuation standards, which makes it possible to uniforms that are interpreted and compared by

the economic agents involved in the operation of the company.

In addition, Project Tomorrow (s.f.) explained that the overall objective of financial

accounting is to generate timely and useful information for the decision making of different

users, check all financial operations carried out in the entities and report on the effects of the

operations performed on the finances of the company.

On the basis of the definitions provided by the authors cited, it may indicate that the financial

accounting is the tool that provides the administrator or manager the information you need to

evaluate and formulate their own conclusions on the financial behavior of the entity; for by

means of this information and by other elements of judgment

You'll be able to evaluate the future of the company and make decisions of an economic

nature. In addition, communicate useful information to creditors, shareholders of the business

and the public interested in the financial information of the organization.

Andrade of Guajardo and guajardo (2014) refers to the fact that the financial information is a

tool for competitiveness, as companies that do not have efficient information systems, and

among them the accounting, cannot compete. This is due to the fact that the decisions made in

the business relate to how are obtained and resources are used; these are created by the activities

of operation, which means decisions of operation; the contributions of the partners or external

financing, which means funding decisions; in addition to the use of resources also involves

making decisions relating to the investment. Thus, the use of the information becomes strategic

to achieve the objectives of the organization.

It is important to mention that due to the importance and use that is given to the information

provided by the financial accounting, it must possess certain qualities to be useful to the users.

According to Andrade of Guajardo and guajardo (2014) The four principal qualitative

characteristics are understandability, relevance, reliability and comparability.

Understandability: an essential quality of the information provided in financial statements is

that it is easily understandable to the users. For this purpose, it is assumed that users have a

reasonable knowledge of economic activities and the business world, as well as its accounting,

and also the willingness to study the information with reasonable diligence. For this reason the
information about complex issues that should be included in the financial statements should not

be excluded only for the mere reason that can be very difficult to understand for certain users.

Relevance: To be useful, information must be relevant to the needs of decision-making on the

part of the users. Information has the quality of relevance when it influences the economic

decisions of those who use it, helping them to evaluate events past, present or future, or to

confirm or correct assessments carried out earlier.

Reliability: To be useful, information must also be reliable. Information has the quality of

reliability when it is free from material error and bias or prejudice, and users can trust that is the

true picture of what it purports to represent, or what can reasonably be expected to represent.

Comparability: Users must be able to compare the financial statements of an entity over time,

in order to identify trends in the financial situation and performance. You should also be able

users to compare the financial statements of different entities, with a view to assessing their

financial position, performance and changes in financial position in relative terms.

Quoting Andrade of Guajardo and guajardo (2014), Accounting has two additional

subsystems of information; the fiscal accounting that its primary purpose is to comply with tax

obligations, is useful only for government authorities and administrative accounting is a system

at the service of the internal needs of the administration, guidance to facilitate the administrative

functions of planning and control, as well as in the decision-making process.

Despite the fact that the fiscal accounting is useful only for the fulfillment of tax obligations,

some companies now take it as a frame of reference for information for decision-making. In this

sense, it is prudent to question whether at the time of an investor deciding whether or not to

invest in a determine entity, you can decide whether only account with financial statements

prepared for the payment of taxes and are subject to criteria contained in the tax law of each

country that generate differences in the design of income and expenditure.

It is important to mention that financial accounting is regulated by the international financial

reporting standard for public enterprises, this because the users require a standard in the

presentation of the information to make it comparable to other cycles of the business and/or other

economic entities.

This is one of the characteristics that differentiate it from the administrative account that is not

subject to accounting standards or formats, as it adapts to the needs of internal users of the

organization. Another feature that differentiate these subsystems is that financial accounting does

not interact with other disciplines since it basically uses the information generated by the

accounting systems manual or electronic; however, the management accounting relates to the

statistics, economics and other disciplines with the aim of generating very detailed and accurate

information for decision-making.

For users that are produced and used the information generated by the financial accounting is

very important to know its conceptual underpinnings, with the aim of knowing the standards

applied during the process for its preparation; the conceptual frame of reference of the financial
information is a coherent system of interrelated objectives and fundamentals that establishes the

nature, the role and limitations of financial information. To have this reference framework

provides direction, structure and consistency to the issue of standards of financial information; it

also serves as a rational and theoretical support in the development of these. For users of

financial information, the conceptual frame of reference facilitates the understanding of the


The authors Andrade of Guajardo and guajardo (2014), argue that the conceptual framework

is composed of seven components: the needs of the users and objective of financial statements;

qualitative characteristics of financial information; basic postulates; the basic elements of the

financial statements; rules of recognition and valuation; standards of presentation and disclosure;

supletoriedad standards.

The basic elements of the financial information are: assets, liabilities, capital, income and

expenses. The assets are the resources available to the entity and which are expected to obtain a

benefit, it is classified in circulating and non-circulating. The liabilities are the debts or

commitments that the entity has with third parties and are classified into short and long term. The

capital is the contribution of the owners or shareholders and is classified in cattle and

contributed. Income are the resources that gets the entity as a result of their operations. The costs

are the expenses or resources used to generate income.

The end product of the process accounting is the financial information, allowing users to

focus on the evaluation of the financial situation, profitability and liquidity. Based on the
information needs of the users, accounting considers that every business must submit four basic

reports: the state of results, which reports on the profitability of the operation; a statement of

changes in equity, whose objective is to show the changes in the investment of the owners of the

company; the statement of financial position or balance sheet, whose purpose is to present a list

of resources (assets) of the company with the sources of financing (liabilities and capital) of such

resources; the statement of cash flows, whose objective is to report on the liquidity of the

business; that is to say, to present a list of the sources and cash disbursements, which constitutes

a basis for To estimate the future cash needs and their likely sources.

1. Alcarria, Jaime Jos J. (2008) Financial Accounting Publicacions de la Universitat Jaume

2. Andrade, Guajardo (2014) Financial Accounting. Mexico. Sixth edition, McGrawHill,.


3. Definition of financial accounting (Online) Retrieved on 10 April 2016.

Available at:

4. Project Tomorrow. It is financial accounting. (Online) Retrieved on 10 April 2016.

Available at:

5. Project Tomorrow. Importance of financial information for companies. (Online) Retrieved

on 10 April 2016. Available in: financial information-


6. Mallo, Carlos and polished, Antonio. Financial Accounting. A current approach. Editorial

Auditorium, 2008.