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What is the main function of financial accounting?

Financial accounting is a specific branch of accounting involving a process of recording, summarizing, and reporting the myriad of transactions resulting from business operations over a period of time. These transactions are summarized in the preparation of financial statements, including the balance sheet, income statement and cash flow statement, that record the company's operating performance over a specified period. Accounting is crucial for managing and analysing the financial resources of a company.

Financial accounting refers to the field of accounting that focuses on summarizing, analyzing, and reporting the financial transactions related to a business. It involves preparing financial statements that are available for public use.

And, the following article takes a deeper look at how this process helps businesses, what its main goal is, and how you can utilize this process professionally to become a financial expert. So, read more to find out.

The main function of financial accounting

The chief function of financial accounting is to prepare financial reports that give you information about a company’s performance. They are primarily used to convey the financial information about a firm to external parties such as creditors, investors, and tax authorities. 

A financial accountant may keep track of the incoming and outgoing cash flow and record all financial transactions. They may use that information and past financial data to analyse the overall expenditure and prepare financial reports.

It aims to prepare an organization's financial accounts or financial statements (cash flow statement, balance sheet, and income statement) for a particular duration.

Further, financial accounting helps shareholders and creditors understand the financial health of an enterprise. It aids them in the decision-making process as they can evaluate the current status of a company and forecast its performance accordingly. It also helps them in understanding how well the company operates in different situations.

Besides, financial statements enable a company to meet fiscal, statutory, and legal requirements as well. In some cases, it is mandatory to prepare these statements. All in all, the main purpose of this process is to enable third parties to assess an organization.

Notably, public companies use the accrual accounting method while private companies can use the cash accounting method. And, both methods have their pros and cons.

How to pursue a career in financial accounting?

Diploma in Banking and Finance

Financial accounting is imperative for modern organizations. That is why they rely on financial experts to take care of this aspect of their operations. If you want to pursue a career in finance, then it would be best to get an IIM Calcutta Executive Programme in Investment Banking and Capital Markets or a Postgraduate Program in Banking and Finance.

A Postgraduate Program in Banking and Finance will give you an overview of financial accounting along with other relevant concepts. Similarly, an IIM Calcutta Executive Programme in Investment Banking and Capital Markets will teach you the basic and advanced concepts of business and finance, as well as the latest technologies used in the investment sector.

Learning about these latest subjects will help you stay on top of the industry trends and remain an in-demand professional.

Financial accounting is necessary for every business to evaluate its financial health and show it to external parties. That is why there is a huge demand for experts who can perform this process effectively and efficiently. Businesses are constantly searching for professionals who can create accurate and descriptive financial statements. 

We recommend pursuing a Postgraduate Program in Banking and Finance if you want to become a professional in this field.

Related Article:

What Is Financial Accounting Advantages And Disadvantages?
Future Of Financial Accounting From 2021: How Will Digital Transformations Impact Accountants?
How To Choose The Right Course To Become A Financial Analyst

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