Chapter 1

What Is Financial Accounting?

Financial accounting is the process of recording all financial transactions undertaken in a business. Here, “all” implies those transactions that are material enough so as to have an impact on the decision making of the entrepreneur.

Once the transactions are recorded, they are summarized to make them fit for analysis and interpretation by managers and users.

The entire accounting process comprises the following stages.

  1. Recording of transactions in the books of original entry, that is, ­journal
  2. Posting them to the appropriate ledger
  3. Preparation of trial balance
  4. Preparation of final accounts

The whole ...

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