Accounting

Introduction

In this introduction to financial accounting, novices will learn about the fundamentals of
financial accounting. This introduction to financial accounting might also assist university
students studying business administration. To begin, it's important to establish what financial
accounting really is. Financial accounting, on the other hand, is all about keeping track of all of a
company's commercial activities in a logical and chronological order. It is possible to record
transactions in chronological sequence, but it is also possible to record transactions in a
systematic manner.

Why is Financial Accounting Necessary for Your Business?

Secondly, why do we use financial accounting in business administration classes?

Self-information: There is nothing more important to us as business owners and managers than
knowing how our firm is doing and where it stands. Let's start with some of the most basic
strategic issues. You need to know how much money your firm has in its bank accounts,
stockholders' equity, and debt. Is your business making money or losing it? How much liquid
capital do you have to satisfy all of your company's debt obligations to creditors? You'll have to
address these basic issues, as well as those of a strategic kind. All of your analysis will be based
on the financial statement.

Additionally, it is important to have a record of all the firm's acts, as well as its accountability. In
other words, if we can provide proof of commercial activity, we may be held liable for the
outcomes. Our company's financial results may be seen in our Balance Sheet and Income
Statements. Among other things, creditors may seek to know the company's assets, liquidity,
equity and liabilities. It is possible for lenders to make a decision about your creditworthiness
based on this information.

We may be required to undertake a tax audit by the government or other third parties (banks,
business partners) may seek information during certain transactions, such as determining whether
we have sufficient collateral for the credit sought by creditors.

Accounting's underlying structure

An in-depth introduction to financial accounting addresses the fundamentals. Accountants are

familiar with the phrase "double-entry accounting." In financial accounting, the term "double-
entry" refers to accounting that includes both stock and income records. While on the one hand, a
Balance Sheet will be created so that assets, equity, and liabilities may be valued. An Income
Statement, on the other hand, is a record of money coming in and going out via revenue (Profit
and Loss Account). However, the story of financial accounting does not stop there. To keep track
of the influx of cash, you'll need a cash flow statement. The short, medium, and long-term
movements of your company's cash are shown in the cash flow statements.

The Financial Statements.

The value of a company's assets, equity, and obligations as of a certain date may be seen on its
balance sheet (point in time). This means that the balance sheet only displays stock as of a
certain date, such as "Balance Sheet as of 31.12.2020." A T-account is used to depict the balance
sheet's left and right sides. Debt on the balance sheet shows the value of long- and short-term
assets (left). The firm's long-, medium-, and short-term obligations are listed on the credit side of
the balance sheet (on the right). In general, you'll want to keep track of the influx and outflow of
all of your financial assets and obligations. Keeping track of the value of your company's assets
and liabilities is essential if you want to figure out how much stock is worth.

Profit and Loss Account, Income Statement

A company's equity may be affected by actions that both generate and consume income,
including the selling of products. As a result, it's important to keep track of both the items sold
and the costs expended. The income statement summarizes the final results (or profit and loss
account).

CFO's Financial Statement

When it comes to keeping track of your company's cash flow, you need to compile a cash flow
statement. The liquidity cash flows for the short, medium, and long term may be displayed.
Immediate inflows and outflows are the focus of short-term planning (daily, weekly and
monthly). A forecasted flow of liquidity between two and three months may be seen in the
medium-term. Long-term liquidity financial statements may be constructed for periods of more
than three months.