Question

What is the function and primary focus of financial accounting?

Answer 1

The Function and Primary Purpose of Financial Accounting 

A.    The primary focus of financial accounting is on the information needs of investors and creditors.

B.    Financial statements convey financial information to external users.  

1.   Balance sheet or statement of financial position

2.   Income statement or statement of operations

3.   Statement of cash flows

4.   Statement of shareholders\' equity

The focus of financial accounting is on summarizing and reporting a business\'s financial position to entities outside the business with a vested interest, such as stockholders, creditors, government agencies and suppliers. 

 

Financial accounting seeks to measure business activities of a company and to communicate those measurements to external parties for decision-making purposes. The two primary external, or outside the firm, users of financial accounting information are investors and creditors. Managerial accounting deals with the methods accountants use to provide information to an organization\'s internal users, that is, its own managers.

 

The primary functions of financial accounting are to measure business activities of a company and to communicate information about those activities to investors and creditors for decision-making purposes. 

Financial accounting serves the following purposes: producing general purpose financial statements. producing information used by the management of a business entity for decision making, planning and performance evaluation. producing financial statements for meeting regulatory requirements.

The primary focus of financial accounting is on the information needs of investors and creditors