Financial Accounting is a branch of accounting which provides methods of recording financial transactions. Using various methods of recording, summarizing and presentation, these transactions are the source of financial statements such as income statement, balance sheet, cash flow statement and statement of changes in equity.
Financial statements are issued on a regular basis after each year as it is mandatory in various legislations. However, often companies issues interim reports such as quarterly and half yearly statements to keep its stakeholders updated about the performance of the entity. The purpose is not just to show the worth and value of the entity. Instead, the purpose to issue financial statements is to keep the outside parties such as investors and lenders well aware about the entity performance and financial situation.
In order to make the financial statements comparable all over the world, IASB (International accounting standards board) and FASB (Financial accounting standards board) work rigorously to harmonize the financial accounting sector.