Legal Definitions - financial accounting

Financial accounting is the process of recording and summarizing financial transactions of a business to produce a set of financial records. This includes establishing and settling financial accounts, recording transactions, and periodically extracting, sorting, and summarizing the recorded transactions.

Examples of financial accounting include:

• Preparing financial statements such as balance sheets, income statements, and cash flow statements
• Recording transactions such as sales, purchases, and expenses
• Calculating and reporting taxes owed

These examples illustrate how financial accounting is used to keep track of a business's financial health and to provide information to stakeholders such as investors, creditors, and government agencies.