Financial and Management Accounting Essay Example | Topics and Well Written Essays - 1500 words

Financial and Management Accounting - Essay Example It helms in planning and decision making and is governed by strict international standards. Financial accounting plays crucial role in the business world today. It is through financial accounting that flow of money and resources in a business organization is monitored. This includes wages and salaries among others. Since financial accounting involves preparation of key documents like profit and loss account and balance sheet, it shows how transactions are done over a period of time. It also helps stakeholders and would be investors to make the right decision on investments. Financial accounting is governed by a number of legal requirements and principles. According to Collins and Collins (2009), the business entity principle must be observed. It states that each business establishment must be accounted separately and that personal issues should not be accounted together with the business issues. Cost principle should also be in place. It states that only costs as a result of business dealings should be included in the financial account. Objective principle, which stipulates that all information in the financial accounts should not be subjected to personal opinion, should also be observed. Finally, the going-concerned principle should also be observed. This is a legal requirement that states that business operation will go on as long as the business gains assets and discharges liabilities during its normal operations. Financial accounting has a lot of advantages. According to Daniel (2007), financial accounting helps many business establishments to comply with legal requirements which include tax returns among others. Financial statements, such as balance sheets, help the institution in communication in the organization. Financial accounting also helps in protecting business assets, since flow of money and assets is recorded periodically. Finally, it helps in appropriate decision making,