Financial accounting refers to collecting, summarizing and presentation of the financial info resulting from business transactions. It reports the operating profit and the value of the business to the stakeholders. In other words, financial accounting is used for reporting transactions to the stakeholders in a format that is acceptable and adaptable by all businesses. Financial accounting can be done on an accrual basis or cash basis. Accrual basis is highly accepted. An organization may also use a combination of both. Cash basis of accounting requires transactions to be recorded only when the transaction results in a flow of cash. However, under accrual basis, a transaction is recorded when the transaction occurs and revenue is recognized. Once an organization selects the method, cash or accrual, it should consistently use the same. A revenue must be recorded only when it is reasonably certain that it will be realized in the near future. The heart of financial accounting is the Double entry system of bookkeeping. Double entry system refers to recording two aspects of the same transaction. The recording of the aspects will be as per the Golden Rules for Accounting.

Varchas Manohar

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