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The main purpose of this _______ accounting is to ascertain profit or loss during a specific period, to show financial position of the business.
  • a)
    Human resource accounting.
  • b)
    Management account
  • c)
    Financial accounting
  • d)
    Cost accounting
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
The main purpose of this _______ accounting is to ascertain profit or ...
Financial accounting aims at presenting 'true and fair' view of transactions, profit and loss for a period and Statement of financial position (Balance Sheet) on a given date. It aims at computing 'true and fair' view of the cost of production/services offered by the firm.
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The main purpose of this _______ accounting is to ascertain profit or ...
Understanding Financial Accounting
Financial accounting is a specialized branch of accounting that focuses on the systematic recording, summarizing, and reporting of financial transactions for a business. Its primary objectives are to ascertain profit or loss during a specific period and to provide a clear picture of the financial position of the business.
Main Features of Financial Accounting
- Profit or Loss Determination:
Financial accounting helps in assessing the profitability of a business by comparing revenues and expenses over a defined period, usually annually or quarterly. This assessment is crucial for stakeholders to understand the business's performance.
- Financial Position Representation:
It provides a snapshot of the company's financial position at a specific point in time through the balance sheet, which lists assets, liabilities, and equity. This information is vital for investors, creditors, and management to make informed decisions.
- Compliance and Standardization:
Financial accounting adheres to generally accepted accounting principles (GAAP) or International Financial Reporting Standards (IFRS). This standardization ensures consistency and comparability of financial statements across different businesses, enhancing transparency.
- External Reporting:
The primary users of financial accounting information include external parties such as investors, regulators, and creditors. The financial statements produced serve as a basis for evaluating the company's financial health and operational efficiency.
Conclusion
In summary, option 'C' - Financial Accounting, is the correct answer as it encompasses the key functions of determining profit or loss and showcasing the financial position of a business, essential for stakeholders involved in decision-making processes.
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Read the following hypothetical Case Study and answer the given questions:The financial statements, comprising the Trading A/c, Profit & Loss Account, Balance Sheet and Cash Flow Statement, that are prepared from the accounting information are published for the use by different entities, persons, etc. It is therefore essential that the published information is based on defined principles, concrete concepts and conventions. Accounting principles are the basic guidelines that provide standards for accounting practices and procedures to be followed, so that uniformity in accounting transactions is maintained. Accounting concepts are the assumptions on the basis of which financial statements are prepared. Accounting conventions emerge out of the accounting practices that have been followed by various organizations, over a period of time. The generally accepted accounting principles are generally accepted accounting standards. The concepts on the basis of which the financial statements are prepared and are agreed upon by the accountants, acting as a foundation for accounting are called accounting concepts. They are uniform set of rules for uniformity and understandability of accounting information. They are derived from experience. They are not static. It needs to satisfy relevance, objectivity and feasibility. The going concern concept assumes that the enterprise has neither any intention nor any necessity to close the business and will last for a long time. It enables the firms to enter into long term contracts. It enables for the charge or depreciation on assets which have fixed life. Due to this concept prepaid expenses are treated as assets. It helps in the classification of assets and liabilities. According to Consistency concept, the accounting principles and methods should be consistent. It should not vary every year. It enables to compare the financial stability of the business. There needs to be consistency in valuation of stock, depreciation and provisions, to enable better decision making by the management. It doesn’t mean that the accounting methods should not change, but the nature and effect and the reason for change should be stated.________ are the generally accepted rules and assumptions that assist accountants in the preparation of financial statements.

Read the following hypothetical Case Study and answer the given questions:The financial statements, comprising the Trading A/c, Profit & Loss Account, Balance Sheet and Cash Flow Statement, that are prepared from the accounting information are published for the use by different entities, persons, etc. It is therefore essential that the published information is based on defined principles, concrete concepts and conventions. Accounting principles are the basic guidelines that provide standards for accounting practices and procedures to be followed, so that uniformity in accounting transactions is maintained. Accounting concepts are the assumptions on the basis of which financial statements are prepared. Accounting conventions emerge out of the accounting practices that have been followed by various organizations, over a period of time. The generally accepted accounting principles are generally accepted accounting standards. The concepts on the basis of which the financial statements are prepared and are agreed upon by the accountants, acting as a foundation for accounting are called accounting concepts. They are uniform set of rules for uniformity and understandability of accounting information. They are derived from experience. They are not static. It needs to satisfy relevance, objectivity and feasibility. The going concern concept assumes that the enterprise has neither any intention nor any necessity to close the business and will last for a long time. It enables the firms to enter into long term contracts. It enables for the charge or depreciation on assets which have fixed life. Due to this concept prepaid expenses are treated as assets. It helps in the classification of assets and liabilities. According to Consistency concept, the accounting principles and methods should be consistent. It should not vary every year. It enables to compare the financial stability of the business. There needs to be consistency in valuation of stock, depreciation and provisions, to enable better decision making by the management. It doesn’t mean that the accounting methods should not change, but the nature and effect and the reason for change should be stated.What are Accounting Principles also called?

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The main purpose of this _______ accounting is to ascertain profit or loss during a specific period, to show financial position of the business.a)Human resource accounting.b)Management accountc)Financial accountingd)Cost accountingCorrect answer is option 'C'. Can you explain this answer?
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