This article needs additional citations accounting concepts and conventions with examples pdf verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. This involves the preparation of financial statements available for public consumption.
Stockholders, suppliers, banks, employees, government agencies, business owners, and other stakeholders are examples of people interested in receiving such information for decision making purposes. Financial accountancy is governed by both local and international accounting standards. It includes the standards, conventions and rules that accountants follow in recording and summarizing and in the preparation of financial statements. With IFRS becoming more widespread on the international scene, consistency in financial reporting has become more prevalent between global organizations.
While financial accounting is used to prepare accounting information for people outside the organization or not involved in the day-to-day running of the company, managerial accounting provides accounting information to help managers make decisions to manage the business. Financial accounting and financial reporting are often used as synonyms. To provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. Capital maintenance is a competing objective of financial reporting.
Relevance: Financial accounting which is decision-specific. It must be possible for accounting information to influence decisions. Unless this characteristic is present, there is no point in cluttering statements.
Materiality: information is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements. Reliability: accounting must be free from significant error or bias.