Importance of Accounting in Business - Financial Accounting is a necessity in our life at the level of business activities and companies.
Accounting has a goal, which is to understand the financial reality and the ability to make a decision in financial matters and resources, the accounting process depends on many factors and data that provide data in which the owner of the activity or company can make the right decision and draw future plans, for example, on a personal level, a person in order to make a decision to invest in a particular activity needs to see the financial statements and understand and clear the financial situation, and this necessarily needs him to understand accounting basics to be able to read the numbers correctly.
Financial Accounting is a necessity in our life at the level of business activities and companies.
Accounting also provides an important database to be guided by at any time and also to build on it, accounting in the end achieves financial stability because it is the best way to understand the financial reality and build on it.
Below we will show you the most important elements of financial accounting for business activities.
Definition of financial accounting
Financial Accounting is one of the most important branches of accounting science, because it is the registration and tabulation of data on commercial activities and companies to obtain a set of financial statements through which financial summaries can be collected during a specific period of time in accordance with General Accounting Principles and standards, so the resulting financial information becomes understandable and measurable, in order to represent and standardize the way the data and the items they contain.
The data collected in any accounting program and the items contained within these statements help in determining and supporting the financial position of the activity, and on the basis of these financial operations and actual documents such as bills of sale and purchase, actual users can make appropriate decisions depending on the financial situation.
The importance of financial accounting
The importance of financial accounting lies mainly by controlling the activity financially and recording everything that is issued and received in it, and represents the cornerstone on which the preparation of financial statements is based, as it provides information to help investors determine their financial and investment position.
Therefore, the importance of financial accounting is as follows:
1-the main objective is to prepare financial statements to determine the initial results of the activity, whether it is profit or loss.
2-help in making sound economic decisions and avoiding mistakes.
3-reflect the financial and economic performance of any activity.
4-enables individuals to assess the financial condition of enterprises.
5-maintaining information security by providing all details related to assets, revenues, and liabilities.
6-studying the possibility of investment under the social and political conditions of the country
Principles of financial accounting
Financial Accounting is based on certain fundamentals based on the use of accounting principles through the analysis of assumptions and data used for financial inputs to produce financial reports and information that the activity can through the process of processing this financial information so that we can make the right financial decisions with accuracy and clarity in the future.
the principle of revenue realization: it is the income that arises as a result of the activity of its business.
the principle of cost: registration of assets in the amount of cash and so on.
the principle of matching income with expenses:
determining the result of the work of the accounting unit of profit or loss.
the principle of constancy: continuing to apply accounting rules and procedures from one period to another.
the principle of caution and caution :precautions are taken for possible losses and non-recognition of possible revenues.
the principle of relative importance:information is considered to be of relative importance if its deletion may affect the economic decisions taken depending on the financial statements.
7-the principle of comprehensive disclosure: the published financial statements contain all the necessary and necessary information that enables users of the financial statements to interpret those statements.
Objectives of financial accounting
Financial accounting aims to assist in the information it produces in making decisions about the business activity, by issuing periodic financial reports on the financial position and cash flows, and contain appropriate information to make appropriate decisions.
Below we will clarify the objectives of financial accounting for business activities :
1-providing financial information commensurate with the needs of users.
2-Apply a measurement of your income in the activity periodically.
3-providing information that supports the possibilities of the activity in assessing cash flows.
4-provide information about the sources of economic resources of the activity.
5-providing information on cash flows.
6-determining the financial position within a specified period.
7-finally determine the result of the activity of profit or loss.
Types of financial accounting
There are two types of financial accounting, which help in producing accounting theories and the extent of profit and loss and the amount of financial change within the activity :
1- accounting on a cash basis
This type depends on income and expenses, every addition and deduction, and any transaction made within the activity, and this is not proven inside the papers only after payment in cash, that is, no goods are added until after the funds are actually collected, and this type depends within government institutions more.
2- accrual-based accounting
This type of financial accounting includes expenses and revenues, regardless of payment or collection at the end of the financial year, so all operations, whether cash flows or accumulated, are recorded and become legally binding, despite the absence of cash payments, and this is often adopted within general commercial activities.
Types of financial operations
Financial operations can be defined as an agreement that is made between activities or companies and institutions and affects the accounts and financial statements that are created at the end of the financial year .
Financial operations can be divided into three sections and types :
Revenue operations
They include the operations that occur within the activity as a result of sales and purchases, which is the main goal of commercial activities, expenses that are carried out within it, such as workers ' wages, internal expenses from maintenance, rent (if any), and so on ...
Capital operations
These are the operations that are carried out as a result of the purchase of fixed assets by commercial activities, such as the purchase of land or buildings by the activity, or computer equipment, office furniture, and all assets that can be sold immediately after the closure of the activity and recover their funds, and they must be for the purpose of acquisition and not for the purpose of investment.
Financing operations
These are the operations that are carried out to finance the activity with cash and in-kind assets so that the activity can conduct its business, and this financing can either be obtained from internal sources from the owners of the activity, which is represented by money, or it can be obtained from external sources from third parties in the form of loans.
In the end, it becomes clear to us that the main goal of financial accounting is to prepare the final financial statements, on which commercial activities in general depend in determining the results of their business, whether as profit or loss, which is the basis of any accounting program that supports electronic invoice, or accounting program that supports electronic receipt, so the program of stores, warehouses and points of sale Crystal View is considered one of the best accounting programs for financial accounting in the Arab world.
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