What is the main purpose of financial accounting?

Financial accounting focuses on classifying, recording, summarization, interpreting, and reporting business transactions. Sales, purchases, earnings, expenditures, and other transactions are documented in the company’s books of accounts.

What are the different types of financial accounting?

There are two primary types of financial accounting: the accrual method and the cash method. The main difference between them is the timing in which transactions are recorded. The accrual method of financial accounting records transactions independently of cash usage.

What are the principles of accounting?

Principle of Cost: All equity, contributions, profits and liabilities are to be recorded at their initial purchasing prices. Quantities reported cannot be increased for market value increases or inflation. Principle of Consistency: Accounting practices should be consistent across different aspects of the business.