What is Financial Accounting?

Definition of Financial Accounting:

Financial Accounting helps you understand the impact of financial flows within the business and better manage the inputs.

As a business owner financial accounting is more about the analysis and understanding of key financial concepts including:

1. Profit & Loss statement

As a business owner what you need to know and understand –

• Key elements of the Profit and Loss statement (P&L)
• Factors that impact on sales
• Factors that impact the cost of sales
• Understanding gross profit (GP)
• The impact of certain business decisions on expenses/overheads
• Net profit and what is included or excluded
• Interest and abnormal items
• Understanding key ratios, what they are, how to calculate, and how to use them

2. Cash flow

• How to understand, analyse and report on cash flow
• Positive impacts on cash flow
• Negative impacts on cash flow
• Why and how to reconcile profit to cash flow

3. Balance Sheet

• Key elements of the balance sheet
• Understanding Assets, Liabilities & Equity
• Treatment of director drawings, inter-company and related party transactions
• Why the balance sheet balances
• Key balance sheet ratios: their calculation and understanding

4. Sources of finance

• Working capital or everyday finance
• Establishing funds required for expansion, or accessing long term finance
• Completing loan applications
• Understanding bank finance options and terms
• Non-bank finance options
• Analysing and comparing Lease versus Buy decisions
• Identifying the best ways to manage repayments

To arrange a complimentary jargon-free discussion of your accounting and financial reporting requirements please contact us.