In management literature, it is thoroughly represented that financial accounting incorporates the rules and procedures to express financial information about an organization. Owners may make a direct investment in the business or operate at a profit and leave the profit in the business. Residual interest is another name for owners' equity. Owners' equity signifies the owners' residual interest in the assets of the business. They are probable future sacrifices of economic remunerations which arise as the result of past transactions or events. Liabilities are present obligations of the firm. They represent probable future economic benefit and arise as result of past transactions or events. In this assets are valuable resource that are owned by firm. This is a mathematical equation which must balance. The purpose of financial accounting is to ascertain the results (profit or loss) of business operations during the particular period and to state the financial position (balance sheet) as on a date at the end of the period.įinancial accounting is based upon the accounting equation. Concept of financial accounting: In general way, financial accounting is the statement of information about a business or other type of organization so that executives or staff can assess its financial growth and future results.
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