Major characteristics of financial accounting

Question

Write down the major characteristics of financial accounting?

Answer 1

The characteristics of Financial Accounting are illustrated below:

i) Monetary Transactions: In financial accounting merely transactions in monetary terms are considered. Transactions not stated in monetary terms don’t find any place in financial accounting, howsoever significant they might be from business viewpoint.

ii) Historical Nature: Financial accounting considers merely those transactions that are of past nature that is, the transaction that have already taken place. No futuristic transactions locate any place in financial accounting, howsoever significant they might be from business viewpoint

iii) Legal Requirement: Financial accounting is a lawful requirement. It is essential to manage the financial accounting and make financial statements there from. It is also compulsory to get these financial statements checked.

iv) External Use: Financial accounting is for those people who are not fraction of decision creating procedure concerning the organization such as customers, investors, suppliers, financial institutions and so forth. Therefore, it is for external employ.

v) Disclosure of Financial Status: It divulges the financial performance and financial status of the business as a entire.

vi) Interim Reports: Financial statements that are based on financial accounting are interim reports and can’t be the last ones.

vii) Financial Accounting Process: The procedure of financial accounting gets affected because of the various accounting policies followed through the accountants. These accounting policies vary mostly in two areas: Calculation of depreciation and Valuation of inventory.