Features or Characteristics of Financial Accounting

Features or Characteristics of Financial Accounting

The major features of financial accounting are as follow:

Monetary transactions

Financial accounting records only monetary transactions.

Monetary means related to money.

It does not record any non-monetary transaction such as value of skilled labour and machine shut down due to load shedding.

Based on concepts

Financial accounting is based on accounting concepts like generally accepted accounting principles (GAAP), the Financial Accounting Standards Board (FASB).

These accounting concepts are followed worldwide.

Historical nature

Financial accounting records only took placed monetary transaction.

These transactions are historical in nature because they have already occurred.

It does not record any estimated or forecasting transactions.

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Legal requirement

For Joint Stock Company, it is necessary to prepare financials statements.

It is legal requirement.

It is obligatory to get audited these statements from auditor.

These financial statements must to submit to company registrar office each accounting year.

External use

Generally, company prepares financial accounting for its external users.

They are investors, customers, suppliers, consumers, financial institutions etc.

They use financial statements to compare interest, dividend, price of goods or service etc.

Financial accounting process

Different accountants follow different accounting policies.

The process of financial accounting gets affected due to the different accounting policies.

Main different accounting policies are valuation of inventory and calculation of depreciation.

Bases for other accounting

Financial accounting forms the bases for other branches of accounting.

They are cost accounting, management accounting, tax accounting etc.

Finance is totally depended on financial accounting.

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