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Regardless of the industry in which the company operates, it needs to honor its legal commitments, meeting deadlines and keeping books up-to-date. In this regard, financial accounting is necessary to keep all accounts, whether internal or external, organized.

Therefore, the manager needs to be organized in order to make payments and keep the cash flow always positive. That is what we are going to show you in this post. Read on!

What is financial accounting?

Financial accounting is a way of using a company’s statements as a means of information for external agents, such as governments, shareholders, investors and financial institutions.

Thus, each external agent will use the information according to their needs. It can also be a way of monitoring the company’s financial health.

After all, it is necessary to always be careful to avoid potential drops in sales or pay attention to news that could affect the investments.

What is the purpose and importance of financial accounting?

The purpose of financial accounting is to keep the legal obligations of a company up-to-date, making an adequate planning within the economic reality of each business.

In addition, the initiative analyzes data from both the past and the present, in order to establish a position for the company.

By knowing the financial health status, it is possible to present comparisons, stipulating investments or withholding expenses, all with a focus on management.

How should it be done?

The financial statement is carried out by analyses in specific fields, presenting a systemic view of the business. To that end, there is nothing better than having management software.

There are statements that help in calculations, presenting the results that will guide the accounting. Here is what they are!

Balance Sheet (BS)

This is a statement that shows the company’s equity.

It contains everything the company has, from equipment to real estate.

Thus, the BS is formed by assets, rights and obligations that the company has, whether they are increasing or decreasing. With it, it is possible to measure cash, liquidity, indebtedness and profitability.

Income Statement (IS)

The IS presents data on the company’s operating and non-operating activities.

In most cases, it is prepared once a year, always focusing on compliance with legal requirements.

But it can also be done in a shorter period, mainly for internal control purposes. In this statement, inflows and outflows are considered, as well as taxes.

Cash Flow Statement (CFS)

This statement is very similar to the IS. It indicates financial transactions and includes, in addition to cash flow, financial investments and bank accounts.

Why should you do financial accounting?

In general, financial accounting is a fundamental activity to keep payments up to date and to always have data to assist in decision-making.

As such, the planning and the financial control become everyday operational partners. But for everything to run well, there is nothing better than relying on technology.

Financial accounting is essential in any business, and it is part of the routine of managers who always want to evolve and keep the budget in the black.

So, do you want to know more about accounting? Then read this post and learn about the accounting break-even point.