Framework of Financial Accounting System
Process: Generally Accepted
Inputs – Financial
Transactions
1. A transaction takes place.
2. It is recorded on a “Voucher”
– cash, bank, purchase,
invoice, journal voucher
3. It is classified into
appropriate accounts –
Liability, Asset, Income,
Expense
4. It is``“posted” into account
books – day books, general
ledger/ledger
Accounting Principles
(G.A.A.P.)
Financial
Accounting as
Information System
Information on Resources:
1. Types of resources – tangible
and intangible (knowledge-
based)
2. How are they
acquired/financed? – By
borrowings, equity, both?
3. How are they used in
producing/delivering goods and
services of the organization?
Outputs:
1. Balance Sheet – Financial Position
2. Income Statement – Financial Performance
3. Cash Flow Statement – Liquidity Position and
changes in Liquidity during the period
For Whom?
Stakeholders:
1. Shareholders, analysts and others associated
with financial markets
2. Suppliers
3. Financial Institutions
4. Management/Employees
5. Statutory agencies/Regulators
6. Customers