Financial accounting
Financial accounting records and summarises an entity’s transactions and events to produce financial information, including general-purpose financial statements. These statements communicate financial position, performance and cash flows to users such as investors and lenders. The work follows an applicable reporting framework and uses accounting policies, estimates and controls. It differs from management accounting, which focuses on information for internal planning, control and decisions.
Worked example
A retailer records sales, purchases, wages and year-end adjustments, then prepares statements showing its profit and financial position. A separate weekly product-margin report for its managers is an example of management accounting.
Common mistake
Financial accounting is not simply recording cash receipts and payments. Accruals, receivables, non-cash expenses and reporting judgements also affect the statements.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Direct | July 2027–August 2028 |
| ACCA | F2 | Direct | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA2 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |