Government

College
Women
University
Course title: Financial accounting.
Faisalabad
Course code: BBA-304

Name: Noor Fatima

Roll no: 20-155
Department: BS CS
Section: B
Submitted to: Mam Hira Manzoor.
Semester: 2nd

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What is financial accounting?
Answer:
 Financial accounting is a process of gathering information and
producing reports on an organization's financial activity. These
statements summarize a company’s transactions, describe who the
transaction is with and list the date and amount of each transaction.
Companies create financial reports of transactions to render
information on how much the organization is worth. Once they
receive feedback from stakeholders, they can strategically plan the
company's growth pattern.
 Financial accounting is the field of accounting concerned with the
summary, analysis and reporting of financial transactions related to a
business. This involves the preparation of financial statements
available for public use.
 Financial accounting is a particular type of accounting that includes a
method of documenting, summarizing, and reporting the transactions
arising from business operations for a period of time. Such
transactions are outlined in the preparation of accounts, including the
balance sheet, income statement, and cash flow statement, which
document the financial results of the company over a particular
period of time.

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Types of financial accounting:
1. Cash accounting.
2. Accrual accounting.
Financial accounting principles:
1. Economic entity assumption.
2. Monetary unit assumption.
3. Cost principle.
4. Full-disclosure principle.
5. Going concern principle.
6. Matching principle.
7. Revenue recognition principle.
8. Materiality.
9. Conservatism.
Financial accounting statements:
1. Income statement.
2. Balance sheet.
3. Cash flow statement.
4. Retained earnings statement.

Why is it important for small business?

Importance of financial accounting in small business:

Financial accounting is a way for businesses to keep
track of their operations, but also to provide a snapshot of their financial health. By
providing data through a variety of statements including the balance sheet and
income statement, a company can give investors and lenders more power in their
decision-making.
Accounting is important for small business owners as it helps the owners,
managers, investors and other stakeholders in the business evaluate the financial
performance of the business. Accounting provides vital information regarding cost

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and earnings, profit and loss, liabilities and assets for decision making, planning
and controlling processes within a business.
The main objective of accounting is to record financial transactions in the
books of accounts to identify, measure and communicate economic information.
Moreover, tax reporting agencies require you to keep books at a minimum level
that tracks income and expenditure.
Accounting helps a business stay in full control of its finances, while
minimizing business tax and other overheads. ... Businesses that hire good
accountants often benefit from a wide range of other services too, which help to
save money, reduce risk, comply with regulation, manage growth and plan ahead.
Types of business:
1. Sole proprietorship.
2. Partnership.
3. Corporation.
Small business:

Small businesses are privately owned corporations, partnerships, or sole

proprietorships that have fewer employees and/or less annual revenue than a
regular-sized business or corporation. Businesses are defined as "small" in terms of
being able to apply for government support and qualify for preferential tax policy
varies depending on the country and industry.
Accounting for small businesses is done by keeping a complete record of all the
income and expenses and accurately extracting financial information from business
transactions.
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 This is a necessary chore that helps small business owners track and manage
their money effectively – especially during the early stages. Besides keeping you
cognizant about your business’ past and present performance, small business
accounting also helps in generating invoices and completing payroll.
Small business stats show that most businesses in America have fewer than 500
employees. Those businesses with fewer than 100 employees account for 98.2
percent, and those with fewer than 20 employees account for 89 percent of all
businesses in the country.

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