Question

How does financial accounting differ from financial reporting?

Answer 1

Financial Accounting is concerned with the prcoess of recording, classifying, summarizing and reporting of business transactions in an orderly manner. This process is carried out in form of preparation of financial statements. Financial reporting is the process of disclosing valuable information about the financial performance of a business in the form of financial statements over a period of time. The information include, an evaluation of the profitability of the business, financial position of the business, etc.

Financial accounting is useful to have a regular track on the transactions of the business in terms of incomes, expenses, gains, losses, assets and liabilities. Financial reporting is useful to the management and other external users for their future decision making. Financial accounting is performed by classifying, recording and summarising the financial transactions in a most significant manner. Financial reporting is performed by preparing and presenting the financial infromation in the form of statements such Balance Sheet, Income Statement, Cash flow statement, Statement of Retained Earnings, etc.

Financial accounting is a vast concept where as, financial reporting is a part of it.

Financial Accounting is a special branch of accounting. Financial reporting is an integral part of financial accounting.