Frequently Asked Questions

What Is Financial Accounting?
Financial accounting is concerned with the analysis and reporting of a business’s financial transactions. Financial accounting involves preparing financial statements that will be available for public consumption – including banks, suppliers, stockholders, employees, stakeholders and government agencies. These stakeholders can use the information in a business’s financial accounts to inform their decision-making moving forward.
Who Governs Financial Accounting?
Both international and local accounting standards are applied to financial accountancy, and the standard framework of rules and guidelines are set out in the Generally Accepted Accounting Principles – the GAAP. The GAAP includes all the conventions, rules and standards that should be followed when recording and reporting financial statements. In addition to the GAAP, the International Financial Reporting Standards – or IFRS – provide another set of accounting standards that relate to how particular transactions should be reported within the business’s financial statements.
What Should be Recorded in Financial Accounting?
Financial accounting should record all transactions within a business that have a monetary impact – i.e. selling goods or buying supplies. The following transactions should be presented within financial accounts:

• Wages to employees
• Payroll taxes paid to the government
• Sales taxes remitted to the government
• Goods sold to customers
• Invoices from suppliers
• Expense reports from company employees
• Debt incurred from a lender

What Are the Differences between Cash Accounting and Accrual Accounting?
Cash and accrual are the two different types of financial accounting and, although both share the same conceptual framework, they have very distinct methods of doing so. Both rely on double-entry accounting, by which the business records, analyses and reports its transactions – which can be done at the end of the month, the quarter or the year.

Cash accounting focuses on corporate transactions that involve cash, where the bookkeeper debits and credits the cash account in each entry. Accrual accounting describes a recording method that holds all transactional data – it goes further than cash accounting as it records all the transactions that have occurred during the corporation’s operations, not simply monetary transactions.