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Financial accounting principles refers to various guidelines and rules which are necessary for business organisation in order to report its financial data. Financial accounting process includes recording of financial transactions, posing them in different ledgers, summarizing, preparation of financial position statements and reporting of financial performance to various stakeholders. These all activities involved in financial accounting process are governed by financial accounting principles (Edwards, J. R., 2013). In UK common set of accounting principles is UK GAAP(Generally Accepted Accounting Principles). Financial accounting provides groundwork for decision making functions of business organisation. This report exhibits financial accounting and its purposes, internal and external stakeholders, importance of control accounts and main purpose of preparation of bank reconciliation statement.

Business Report

1. Financial Accounting and its Purposes:

Financial accounting is unique field of accounting that includes a systematic process of recording, classifying, summarizing and reporting of financial transaction resulting from various functions of business organisation during a particular period. These financial transaction are classified systematically in order to prepare final accounts such as balance sheet, profit and loss account, profit and loss account or income statement, cash flow statements, change in equity statement and other relevant statements, that are used by business organisations to assess actual financial performance and position (Fourie, 2015). Reporting under financial reporting process assist business organisations to present true picture about financial performance and position before shareholders, government, employees, landers and creditors etc. In financial accounting accounts are prepared by entities as per accounting principles, assumptions and different guidelines, It is governed and administrated by intentional and local guidelines and standards.

Purpose of financial accounting:

Following points are describing key purpose of financial accounting, as follows:

  • Main purpose of financial accounting is reporting of actual position and performance to internal and external users of financial data and information.
  • Activities in financial reporting is framed in a systematic way to provide smoothness in accounting operations.
  • Financial accounting ensures compliance of rules and regulation relating to relevant statute.
  • Activities involved in Financial accounting, acts in conformity of various assumptions, accounting policies, concepts, principles and other significant fundamentals.
  • Strategy formulating and implementation processes in business organisations are purely depends upon results of financial accounting.
  • It provides a decision making framework for investors, shareholders, owners, lenders and creditors, governing body etc.
  • It provides an assurance that accounting policies and procedures adopted by business organisation are uniformly followed.

2. Internal and External Stakeholders:

Stakeholders refers to individuals, persons, body of individuals or organization that has substantial interest or concern in an business organization. Stakeholders are highly influenced by actions of organization, goals or objectives and policies adopted by business organisation. Stakeholders are classified by their nature and concern in two parts: Internal stakeholders and external stakeholders. Large scale organisations have direct or indirect influences of different stakeholder (Hale, 2012). Key stakeholders in business organisation are shareholders, creditors, government directors, employees, owners, suppliers, unions, and the community. Internal stakeholders are those individuals, persons, group or organisation who can influence or are influenced by an business organisation such as directors, owners, employees and management. External stakeholders incudes individuals, persons,groups, body of individuals or organizations outside of business organisation like customers, suppliers, creditors, government or regulatory body, society etc.

Major Internal Stakeholders and their interest in large business organisation:

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