Corporate Financial Accounting: Role and Importance in Business

This report provides a comprehensive overview of financial accounting, defining it as the process of summarizing, reporting, and analyzing financial transactions within a business. It emphasizes the creation of financial statements for both internal and external stakeholders, including investors, creditors, and suppliers. The report details the four key financial statements: the income statement, balance sheet, cash flow statement, and statement of retained earnings, highlighting their respective roles in showcasing a company's financial performance and position. It stresses the importance of adherence to accounting standards, particularly GAAP in the US. Furthermore, the report explores the role of financial accounting within the corporate environment, emphasizing its importance in helping organizations achieve their objectives by communicating financial information to stakeholders. It differentiates between internal stakeholders (employees, owners, managers, investors, and the board of directors) and external stakeholders (consumers, regulators, investors, and suppliers), underscoring how financial accounting serves their informational needs. The report concludes by referencing key academic sources that support the concepts discussed.

Running Head: CORPORATE FINANCIAL ACCOUNTING
CORPORATE FINANCIAL ACCOUNTING
Name of the Student
Name of the University
Author Note

1CORPORATE FINANCIAL ACCOUNTING
Table of Contents
Financial Accounting.................................................................................................................2
Role of Financial Accounting in Corporate Environment.........................................................3
Reference....................................................................................................................................5

2CORPORATE FINANCIAL ACCOUNTING
Financial Accounting
Financial accounting is defined as that field of accounting that is concerned with the
overall summary, reporting and analysis of the financial transactions which is related to the
business. This involves preparing of the financial statements which is available for the use of
public. It is the process of the financial statements which is used by the companies for
showing their financial performances as well as financial position to the people who are
outside the company which includes investors, creditors, customers and suppliers (Lovell,
2014).
Most of the companies put quarterly as well as annual financial statements together,
which are presented or making available to the public who are investing and the shareholders.
The financial performance of the company is showed by the four basic financial statements,
which are as follows:
 Income Statement- This is also known as profit and loss statements. This statement
covers the particular period of time such as a year or quarter. In the income statement,
net income is generated by deducting total revenue from the total expenses.
 Balance Sheet- This is the statement of the assets as well as the liabilities. The
balance sheet is considered as the financial snapshot at the specific period of time or
at the end of the financial year. In the balance sheet, assets are equal to addition of
liabilities and shareholders’ equity (Lovell, 2014).
 Cash Flow Statement- This statement shows the inward and outward flow of cash to
and from the company over the specific time period.
 Statement of Retained Earning- This statement covers the specific time period and
shows the paid dividends from the shareholders earnings and the company’s retained
earnings.

3CORPORATE FINANCIAL ACCOUNTING
Financial statements must confirm to the accounting standards set by regulator. In the US,
financial accounting as well as reporting standards (GAAP) is established by the Financial
Accounting Standards Board (Lovell, 2014).
Role of Financial Accounting in Corporate Environment
Financial Accounting is concerned with the financial statements that are prepared for
the decisions makers that include internal as well as external stakeholders such as creditors,
banks, employees, stockholders and suppliers. Financial accounting helps the organization for
achieving the objectives with the help of assembling, organizing as well as communicating
the information about the corporate environment (Watson, 2015). The role of the accountant
in the corporate includes working in two different accounting principles, which is financial
accounting and managerial accounting. Accounting is the way of communicating the
financial health of the organization to the interested parties as well as it is also the method for
assessment of the liabilities, assets and the cash flows or the company’s future for all the
investors that is current and future. Therefore, it has become the vital part of contemporary
corporate environment (Crowther, 2018).
Internal Stakeholders: These are the individuals or the parties who are the part of the
organizations.
 Employees
 Owners
 Managers
 Investors
 Board of Directors

4CORPORATE FINANCIAL ACCOUNTING
External Stakeholders: These are the stakeholders who are not within the business.
However, they care about or they are one who is affected by the affected by the performance
of the corporate.
 Consumers
 Regulators
 Investors
 Suppliers

5CORPORATE FINANCIAL ACCOUNTING
Reference
Crowther, D. (2018). A Social Critique of Corporate Reporting: A Semiotic Analysis of
Corporate Financial and Environmental Reporting: A Semiotic Analysis of Corporate
Financial and Environmental Reporting. Routledge.
Lovell, H. (2014). Climate change, markets and standards: the case of financial
accounting. Economy and Society, 43(2), 260-284.
Watson, L., 2015. Corporate social responsibility research in accounting. Journal of
Accounting Literature, 34, pp.1-16.