Sample Financial Accounting - Assignment

Financial accounting principle.

INTRODUCTION
Financial accounting principles are referred as the rules or the regulations that has be
comply by the organization at time of reporting the financial data within the statements. The
organization has to formulate its financial reports in accordance and compliance with accounting
principles or rules. Present study is based on Brooks City which is an small business accountancy
firm, it provides tax and accounting services to its customers. This study is based on various
aspects relating to financial accounting. Furthermore, the report present deep insights towards the
meaning and the purpose of the FA. Moreover, it includes the information regarding all the
stakeholders with appropriate preparation of the primary books and the final accounts of the
company. It also highlights the accounting principle that includes consistency and prudence
concept. Report will also provide deeper insight about accounting concepts or rules pertaining to
depreciation, suspense and control account etc. In addition to this, it also develops understanding
about BRS and causes due to which deviations occurred in the same in comparison to cash flow
statement.
MAIN BODY
a. Defining financial accounting and its major purposes
FA refers to the practice of recording, reporting and interpreting the transactions are
resulting from the operations of the business. In this, business transactions are been summarized
within the formulation of the financial reports that includes profit and loss statement, b/s and the
cash flow statements (Barth, 2015). These statements record for the operating performance of an
entity over the particular time period. Financial accounting makes utilisation of the established
principles for the accounting. It is mandatory for all the organization to report their financials in
compliance with the IFRS and GAAP. The development of these principles of an accounting is
to facilitate information on the constant basis to the stakeholders namely creditors, investors, tax
authorities, regulators etc (Libby, 2017). Financial accounting could be performed by utilising
the two main methods that includes accrual and cash method. However, cash method reflects the
recording of the business transactions only on the exchange of the cash. Financial and
management accounting are the main branch of the accounting but differs with each other in the
following manner-
Basis Financial accounting Management accounting
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Meaning It refers to the system of
accounting which emphasize
on formulating the financial
reports in order to facilitate
financial information for the
interested parties.
It implies for the one that
provides relevant information
to managers for the purpose of
making the effective plans,
policies and the strategies in
order to achieve smooth
running of the business
operations.
Type of information It facilitates only monetary
information and not accounts
for the non-monetary
information.
This system provides monetary
as well as the non-monetary
information.
Purpose The major purpose of FA is to
facilitate financial information
to the users.
MA enables the managers in
planning and in taking
adequate decisions with
providing the detailed
information to the management
on several matters.
Users Insider and the outsider
parties, both are considered as
the user of the FA
(Christensen, Nikolaev and
Wittenberg‐Moerman, 2016).
Internal members are the main
users of the management
accounting.
Auditing Financial report under this
system are required to be
audited by the appropriate
statutory auditors.
The reports formulated under
this system does not requires
any auditing.
Time frame Financial statements under Under this reports, financial
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financial accounting is been
framed at year end which is
specifically one year.
statements are been formulated
as per the requirements of an
entity.
Purpose of FA- The main objective of the financial accounting is to facilitate
information that is required for making appropriate economic decisions (Balakrishnan, Watts and
Zuo, 2016). It aims for preparing the financial statements which provides adequate information
in relation to the performance and the position of the firm to the interested internal and the
external parties. The other purposes are as follows-
 Maintaining adequate control on the assets and making an efficient plan in context of the
cash.
 Providing a reliable series of the financial data in order for preparing the financial
statements accurately.
 To formulate financial reports by meeting the regulatory requirements.
b. Describing 2 internal and 4 external stakeholders with showing their interest in the financial
report
Internal stakeholders-
They are referred as the members of an entity's management and the other individuals
present within the organisation makes use of the financial information for the purpose of running
and in managing business (Abernathy and et.al., 2015). The two internal users are as follows-
Managers- They are the person who manages the entire organization. As managers are
responsible for managing the routine functioning of the business so they require accounting
information in order to monitor, measure, plan and in making the business decisions. They need
financial information for allocating human, capital and financial resources towards meeting the
competitive needs of an enterprise by following the process of budgeting (Kim and et.al., 2016).
For framing an effective budget, manager needs relevant accounting data regarding several
processes, services, products, segments, activities and the departments of business. Managers
needs the accounting information for monitoring performance of the business by making the
comparison relating to the past performance benchmarks and the competitors' analysis. They rely
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