What is financial accounting?

chatstickforbrand
Dec 24, 2022
4 min read

What is financial accounting?

Accounting is a job that is no less important than Other work in the organization or company Financial accounts are therefore interesting things. And today we will talk about financial accounts.

Financial Accounting or Financial Accounting will use these criteria in the preparation of financial accounts, including

1. In accordance with the law and must be prepared in accordance with generally accepted accounting principles.

2. Prepare accounting and financial reporting in accordance with Accounting Standards and Financial Reporting Standards.

3. Use the framework of the accounting template, the Accounting Framework, which will have the following criteria:

- The Persistence Criteria is the evidence that the business continues to operate.

- Accrual criteria can know income and expenditure information without thinking about cash immediately.

- Be timely and accurate

Financial statement is a presentation of financial position information at the end of the period in the form of financial reports. To provide information according to the period of 1 month, quarter, half year or 1 year of financial position, operating results, including cash flow.

What are the elements of financial statements? (complete version)

- Statements used to tell information about the financial position shown at the end of the accounting period, including capital, debt and assets, called Statement of Financial Position or Statement of Financial Position

- Statements used to show the results of the period. The details range from income, expenses, profit or loss for the period. up to the items of other comprehensive income But will not tell in the profit or loss, called the statement of comprehensive income (Statement of Comprehensive Income)

- Tell information about the movement of shareholders' interests of the business per period. shows that The investment amount, return and profit are the Statement of Change in Owner's Equity.

- Used to tell information about the cash movement in each period of the business, called the statement of cash flow (Statement of Cash Flow).

- Notes to the financial statements are details about the numbers appearing in the financial statements.

accounting

Accounting will bring evidence about trade. Receipts, delivery notes, and tax invoices are recorded in the daybook, then used to make 5 types of accounting books.

5 types of accounting transactions

1. Assets are the resources that the business has, which are

Non-current assets refer to assets, assets that will be useful in the future for more than 1 year, including assets other than current assets, consisting of

Long-term investments and investments in affiliates, long-term loans , investment properties, property, plant and equipment and other assets such as copyrights, concessions, etc.

2. Liabilities are things that must be paid for assets in the future. arising from the results of past operations to the extent that it is an obligation of the business Liabilities are divided into current liabilities. and non-current liabilities

Current liabilities mean liabilities that the business must pay within 1 year, namely bank overdrafts, trade accounts payable. and accrued expenses due for the following year

Non-current liabilities mean liabilities that the business must pay over 1 year, ie debentures, long-term loans and other liabilities.

3. Owner's equity The part that has written off the debt It is the fixed interest remaining from the assets of the business, namely share capital, premium/deficit of share value, retained earnings, including other components in the shareholders' equity.

4. Income is the income generated from the general operations of the business. including profit items

5. Expenses are expenses incurred during the general operation of the business as follows: cost of goods sold or rendered services, operating expenses, other expenses such as loss from the sale of assets. and financial costs such as interest expenses and bank fees

Steps in making financial statements

- Prepare a statement of comprehensive income, including income, expenses, profit (loss)

- Prepare a statement of financial position, including assets, liabilities, capital

- make a cash flow statement For only showing items related to cash income and expenses Activities in this section include activities that result from operations. investment activities financing activities

- There is a note to the financial statements, which is the addition of information in the financial statements.

Principles of reading basic financial statements

1. Statement of Financial Position

- More assets = Business expands.

- Lots of current assets = business liquidity

- Liabilities greater than equity = Business is at risk.

- High current liabilities = obligations due that the business has to pay in the accounting period, compared to current assets, there are more assets. still considered to be in good financial condition

- Equity has accumulated profits = Wealth

2. Reading the Comprehensive Income Statement = Look at various items to see which part generates some profit.

3. Read the cash flow statement = see the appropriateness and accuracy of the expenditure and analyze it.

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