What is Financial Accounting?

Financial Accounting is the process of documenting, analyzing and reporting every transaction of a
business or an organization, in order to assess the financial health and stability of the same. There are a set
of guidelines to be followed according to the Financial Accounting Standards Board (FASB), US. These
are also known as Generally Accepted Accounting Principles (GAAP), formulated to provide ease,
credibility and uniformity to the accounting processes across companies.

The records of the transactions are done using the Double-entry method where an amount is entered twice
as credit and debit. For example, there is a receipt of a loan of $10000 dollars from a bank. This gets
entered as a credit in the account and also marked as the amount payable. Therefore, a balance of credit
and debit is attained.

Types of Financial Statements

Income Statement
An Income Statement is a document of Revenues, Expenses, Profits and Losses that large businesses
generate in a period of time. The other names of this documentation are ‘Profit and Loss statement’, ‘Net
Income Statement’ and ‘Statement of Earnings’. It is crucial in tracking the scopes of growth, analyzing
the highs and lows in data and taking actions to fix them. An income statement is used internally (among
the directors, managers and employees) and externally (to circulate among creditors and investors). The
content of the statement includes Revenue, expense, Comprehensive income and Cost of Goods sold
(COGS).