Financial accounting is a specific field within accounting that deals with the preparation of the financial statements, which are used by external stakeholders (such as stockholders, banks and public bodies) to get an idea of the financial position of a company. This process is called external reporting. It explains how accounting influences the financial performance measures that are widely used in financial markets by investors, banks, and financial analysts for making investment decisions. Financial reports created for internal use are no part of financial accounting, but are part of management accounting.
This course provides an introduction to financial accounting. It studies the financial accounting concepts and theories with an emphasis on both how transactions lead to financial statements (preparer’s orientation) and how one can infer transactions given a set of financial statements (user’s orientation). This course introduces students to the financial accounting environment, financial statements, the accounting cycle, and the theoretical framework of accounting measurement. It explains the composition and the purpose of balance sheet, the income statement, the statement of changes in shareholder equity, and the cash flow statement and discusses the mutual relationships between these statements. It further explains the basic accounting rules that govern the preparation of these statements. This includes (amongst others) accounting for cash, accounts receivable and inventory.
Next course, Financial Accounting II, will continue introducing students to the financial accounting environment by examining the remaining elements of the financial statements such as property, plant and equipment, intangible assets, financial assets, goodwill and liabilities to aid in decision making.