UTTARANCHAL UNIVERSITY

(Established vide Uttaranchal University Act, 2012, Uttarakhand Act No. 11 of 2013)

Premnagar-248007, Dehradun, Uttarakhand, INDIA

ASSIGNMENT COVER PAGE

Name of Student: RAHUL MISHRA

Batch: JAN-2024

Program: MBA(OL)

Subject & Code: ACCOUNTING FOR MANAGERIAL

DECISION OMBA-112

Semester: 1st SEM

Learner ID: 2325010323

NECESSARY INSTRUCTIONS

1. Cover Page must be filled in Capital Letters. All Fields of the Form are
compulsory to be filled.
2. The assignment should be written / computer typed on A4 size paper and
it should be neat and clearly readable.
3. The cover page should be stapled at the front of each and every
assignment.
4. Incomplete Assignments will not be accepted.
 The Nature and Scope of Financial
Accounting
Introduction
Financial accounting is a branch of accounting that deals with the preparation and
presentation of financial statements for external users, such as investors, creditors,
regulators, and the public. It is also a specialized branch of accounting that involves
recording, summarizing, and reporting the myriad of transactions resulting from
business operations over a period. These transactions are summarized in the
preparation of financial statements, including the balance sheet, income statement,
and cash flow statement, that record the company's operating performance over a
specific period. Here is an overview of its nature and scope:

Nature of Financial Accounting:

1. External Reporting: Financial accounting focuses on providing financial
information to external parties who are interested in the financial health and
performance of the organization. This includes shareholders, investors,
lenders, government agencies, and the public.

2. Historical Perspective: It primarily records and reports past transactions

and events. The emphasis is on presenting a fair and accurate view of the
financial position, performance, and cash flows of the business over a specific
period (typically a fiscal year).

3. Uniform Standards: Financial accounting follows generally accepted

accounting principles (GAAP) or International Financial Reporting Standards
(IFRS) to ensure consistency and comparability of financial statements across
different entities.

4. Objective and Reliable: The information presented in financial accounting

must be objective, reliable, and verifiable. This enhances transparency and
helps stakeholders make informed decisions.

5. Legal and Regulatory Requirements: Financial accounting is governed

by various legal and regulatory requirements, which prescribe the format,
content, and frequency of financial reporting.
Scope of Financial Accounting:

1. Financial Statements: The primary output of financial accounting is the set

of financial statements, including the balance sheet (statement of financial
position), income statement (statement of profit and loss), statement of cash
flows, and statement of changes in equity. These statements provide a
snapshot of the organization's financial performance and position at a specific
point in time.

2. Recording Transactions: Financial accounting involves recording,

classifying, and summarizing financial transactions following accounting
principles. This includes the use of double entry bookkeeping to ensure
accuracy and balance in financial records.

3. External Audit: Financial accounting supports external audit activities

conducted by independent auditors. Auditors review financial statements to
express an opinion on whether they present a true and fair view of the
company's financial position and performance.

4. Decision-Making: External users rely on financial accounting information

to make investment decisions, assess creditworthiness, evaluate management
performance, and determine the economic viability of the organization.

5. Compliance and Accountability: Financial accounting ensures

compliance with tax laws, regulatory requirements, and accounting
standards. It promotes accountability by providing a mechanism for
monitoring and evaluating the stewardship of management over financial
resources.
6. Summarizing Information: Financial accounting summarizes the
classified data to prepare reports and financial statements. This involves
creating trial balances, income statements, balance sheets, and cash flow
statements.

7. Reporting Financial Results: Financial accounting focuses on preparing

financial statements that reflect the financial performance and position of a
business. These statements are used by external stakeholders to make
informed decisions.
Conclusion:

In summary, financial accounting serves the purpose of communicating the financial

results and position of an organization to external stakeholders in a standardized,
reliable, and transparent manner. It plays a crucial role in fostering trust and
confidence in the financial markets and supports economic decision-making at both
individual and organizational levels.