Financial Accounting Case Study

QUESTION 1

Financial Accounting is an accounting system that tries to meet the needs of the various user

groups especially for external users. It’s overall purpose is to construct financial reports that

provide information about a firm's performance to external parties such as investors, creditors,

and tax authorities. Types of financial reports used are Statement of Financial Position,

Statement of income and Statement of cash flow. Users of the information are stockholders,

government, investors and tax authorities.

Management Accounting is an accounting system is used for internal decision making. It’s

overall purpose is to contribute managers with financial and statistical information which will

help them carry out their

Users of the

information are managers, owners and partner.

Both financial and management accounting provide financial information to their users. They

also report upon the activities and success of the enterprise to interested parties. Both evaluate

what the management has done with the money invested in the business. Financial

Bookkeeping always helps a business owner to have more

understanding of how much progress the business has made. (David, 2015)

Meanwhile, on the other hand, financial statement is also important for every business for a

couple of reasons. Company's financial statements provide important information about its

financial health. These statements are arranged based on day-to-day bookkeeping that tracks

funds flowing in and out of the business. The information the statements provide offers

benchmarks and feedback that help the company make minor adjustments and also determine its

overall direction. Financial statements are useful for making decisions regarding expansion and

financing. They also figure into marketing decisions, giving data specifying which aspects of

company operations provide the best return on investment. (Gartenstein, 2015)

The accounting cycle is a common practice in financial accounting that allows an organization to

record and calculate its financial activities. The cycle consists of a number of steps, each of

which depends on earlier steps to collect data and organize it in a meaningful way. Small

businesses, which shortage of full-time accounting departments, rely on the accounting cycle