What is financial accounting and what are its advantages?

Every business needs a financial accounting service for day-to-day reporting of business activity. No matter if you are the small owner or MNC or an individual, you will require an accountant to ensure proper and accurate maintenance of the financial data. Financial accounting tracks the inflows and outflow of funds and ensures it happens smoothly and effortlessly.

Looking for financial accounting service in the UK

Meru Accounting is a one-stop solution for accurate and effortless financial accounting. We have a dedicated team of CPAs, CAs, and accountants to take of your financial figures. Our team will assist in recording, summarizing, and reporting financial transactions.

They will prepare financial statements to show the current financial health of the business. This financial statement includes:

• Profit and loss account.
• Balance sheet.
• Cash flow statement.

Are you naïve and not aware of the financial jargon? Let’s learn to have some basic understanding of financial accounting.

What is Financial Accounting?

It is essential to be aware of the meaning and scope of financial accounting. In layman’s terms, accounting is the systematic process of maintaining accurate and proper financial records about the business. These records are categorized into credit and debit financial transactions. In simple terms, it keeps track of how much has moved in/ out of the organization.

Financial accounting includes an accurate and timely recording of financial transactions, summarizing all the transactions, analyzing them, and reporting the results to the users of accounting information. It is generally prepared once a year but can be done semi-annually or quarterly according to the reporting requirements of the company.

Financial accounting tasks include:

• Bookkeeping.
• Payables accounting.
• Receivables management.
• Payroll Processing.
• Management accounting.
• Tax Preparation.
• Preparation of Financial Statements.

Advantages of financial accounting

Systematic Business Records:

Companies need to track the transaction incurred concerning the business. Accurate and proper accounts are systematically maintained to record every financial transaction. It is also necessary for compliance purposes that businesses have to adhere.

Financial records are crucial for businesses for:

• Reporting of the financial performance.
• It is a regulatory requirement to stay compliant with the regulatory authorities.
• Preparation of financial reports.
• Auditing.

Error and fraud detection:

It helps in the early detection of errors and frauds as all the records are maintained regularly on a timely basis. Even the fraud made by following the complex business transaction and fictitious entries can be detected while conducting an audit of the financial records.

The financial position of the business:

It shows the true and correct view of the financial position of the business. Financial information is used by internal management to make informed business decisions. The manager assesses the financing requirements of the business based on the records supplied by financial accounting departments.

Performance assessment:

Accounting information is a useful tool for assessing the business performance compared to previous years and the industry average. For instance, comparison of profit and expenses ratio with industry’s average and prior year to ascertain the performance of the business and take corrective steps if required.

FAQs

1. Why should my business use a financial accounting service?
   A financial accounting service tracks all money in and out. It keeps records clear, helps plan, and aids smart business choices.

2. How often should I prepare financial statements?
   Financial statements can be done yearly, half-yearly, or each quarter. Regular checks show progress, spot mistakes, and meet rules.

3. What financial statements does a business need?
   The key statements are profit and loss, balance sheet, and cash flow. They show income, spend, and money health.

4. Can a financial accounting service spot errors or fraud?
   Yes. Accurate and timely recording of transactions helps find mistakes and unusual activity. Professional services also prevent fraud before it becomes a problem.

5. What tasks does a financial accounting service handle?
   It does bookkeeping, pays bills, tracks money owed, handles payroll, readies taxes, and makes financial reports. This keeps records neat and correct.

6. How does financial accounting help business decisions?
   Financial reports show income, spend, and cash flow. Managers use this information to plan budgets, cut costs, and make smart choices.

7. Is a financial accounting service helpful for small businesses?
   Yes. Small firms also gain from clear records. It shows growth, keeps money in check, and meets rules.

8. Can I understand financial accounting myself?
   Yes. Simple terms like debit, credit, and tracking money help you read reports. Hard tasks are best left to professionals.