FINANCIAL ACCOUNTING

Financial
accounting is concerned with
external reporting of information
to parties outside the firm
Consider that financial
accounting is targeted toward a
broad base of external users,
none of whom control the actual
preparation of reports or have
access to underlying details.
Their ability to understand and
have confidence in reports is
directly dependent upon
standardization of the principles
and practices that are used to
prepare the reports. Without
such standardization, reports of
different companies could be
hard to understand and even
harder to compare. As a result,
there are well organized
processes to bring consistency
and structure to financial
reporting. In the United States,
a private sector group called the
Financial Accounting Standards
Board (FASB) is primarily
responsible for developing the
rules that form the foundation
of financial reporting. With the
increase in global trade, the
International Accounting
Standards Board (IASB) has been
steadily gaining prominence as a
global accounting rule setter.
Financial reports prepared under
the generally accepted
accounting principles (GAAP)
promulgated by such standard
setting bodies are intended to be
general purpose in orientation.
This means they are not
prepared especially for owners,
or creditors, or any other
particular user group. Instead,
they are intended to be equally
useful for all user groups. As
such, attempts are made to keep
them free from bias (neutral)