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The accounting equation (Assets = Liabilities + Owners' Equity) and financial statements are the main topics of financial accounting. The trial balance , which is usually prepared using the double-entry accounting system , forms the basis for preparing the financial statements.
Accounting concentrates on the past and keeping accurate records, while finance and financial accounting look ahead and serve a strategic function. Tried-and-true methods of financial accounting
Accounting, also known as accountancy, is the process of recording and processing information about economic entities, such as businesses and corporations. [1] [2] Accounting measures the results of an organization's economic activities and conveys this information to a variety of stakeholders, including investors, creditors, management, and regulators. [3]
Accounting standards are currently set by the Financial Accounting Standards Board and were historically set by the American Institute of Certified Public Accountants (AICPA) subject to U.S. Securities and Exchange Commission (SEC) regulations. [7] Auditors took the leading role in developing GAAP for business enterprises. [8]
IAS 1 sets out the purpose of financial statements as the provision of useful information on the financial position, financial performance and cash flows of an entity, and categorizes the information provided into assets, liabilities, income and expenses, contributions by and distribution to owners, and cash flows.
The purpose of the MD&A is to provide a narrative explanation, through the eyes of management, of how an entity has performed in the past, its financial condition, and its future prospects. In so doing, the MD&A attempt to provide investors with complete, fair, and balanced information to help them decide whether to invest or continue to invest ...
The accounting equation is a statement of equality between the debits and the credits. The rules of debit and credit depend on the nature of an account. For the purpose of the accounting equation approach, all the accounts are classified into the following five types: assets, capital, liabilities, revenues/incomes, or expenses/losses.
The primary purpose of bookkeeping is to record the financial effects of transactions. An important difference between a manual and an electronic accounting system is the former's latency between the recording of a financial transaction and its posting in the relevant account.