Functions of Financial Accounting

What are the main functions of financial accounting?

There are many functions of financial accounting. The major functions are as under:

Recording

Recording is the basic function of financial accounting.

It is principally based on all financial transactions of business.

These financial transactions are recorded in chronological order.

They are initially recorded in the journal entries.

Classification

After recording financial transactions in journal entries, they are classified into different related group according to their nature. 

The work of classification is done in the book of ledger account.

Summarising

Classified data (ledger account) are summarised into trial balance.

Arithmetic accuracy is checked from trial balance.

From trial balance, different financial statements like trading account, profit and loss account and balance sheet are prepared at the end of accounting period.

#######

#####

Analysis and interpretation

The recorded financial data is analyzed.

It is interpreted in a manner that the end-users can make a meaningful judgment about the financial condition.

The data is also used for preparing the future plans and framing of policies for executing such plans in actions.

Communication

Different analysed and interpreted accounting information are to be communicated to the different interested parties.

They are shareholders, creditors, investors and trade union etc.

These are equally useful to management itself.

They use this information for various purposes according to their need.

This is done through preparation of accounting ratios, graphs, diagrams, funds flow statements etc.

***********

Thank you for investing your time.

Please comment on article.

You can help me by sharing this article at your social media platform.

Jay Google, Jay YouTube, Jay Social Media

जय गूगल, जय युट्युब, जय सोशल मीडिया