Organizational Changes

Accounting is system of gathering, summarizing, analyzing and reporting the financial information of an organization. Business accounting consists of management accounting and financial accounting.

Both are very important for any business organization but are fundamentally different. Financial accounting has a single unified format of presentation. This means that the information of the business enterprise is presented with uniformity. The end products of financial accounting are basically the statements related to the financial performance of the business. These are:

*The profit and loss account statements

*The balance sheet

*The statement of changes in financial position.

A balance sheet usually shows the financial status of an organization. The statement of profit and loss has the company's performance status in it for a certain limited period. This is usually one year. The last statement helps to report the inflow and outflow of the financial resources of the company. Depending on the model, the financial statements are prepared and presented uniformly. Accounting periods are set by the accounting standards of the system. Some statements are delivered quarterly whilst others every six months or a year.

Financial accounting provides a financial overview of the business in the form of information that involves the cost, revenue and the profit of each respective division of the business.

There are some limitations of financial accounting. These are as follows:

It does not necessarily provide the information that reflects the business at a certain point in time. There are lead and lag times involved in the recoding of transactions.

Financial management accounting usually doesn't focus on non monetary performance information. Issues such as productivity, sales management, business growth and expansion, customer relationship management and marketing are not usually considered within the realm of financial accounting. They are interdependent but not usually considered to be part of the central core objectives of accounting or the roles of accounting personnel.

Financial accounting doesn't provide the current value of the business. Valuation analysis uses the values contained within the companies financial statements to make an assessment of the companies anticipated worth and factoring in an assigned value for the good will of the business attributed to its customer base.

Advanced financial accounting is necessary for business viability and performance. Without knowing its financial standing a company can run the risk of not being able to pay its expenses. Financial accounting is also necessary as a framework of reference for a company to measure how well it is accomplishing its goals and to allocate resources according to its growth objectives.

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