Financial accounting is the branch of accounting involving the process of recording, summarizing and reporting a company’s or organization’s financial activities for a specific period of time. This information is presented in the financial statements, which are:
- Τhe Balance Sheet
- The Income Statement
- The Statement of Cash Flows
- The Statement of Stockholders’ Equity, and
- Accounting Policies and Notes
The objective of financial accounting is to meet the informational needs of a broad audience, which is not restricted to the company’s owners, but is also extended to external users (current and future), such as creditors and investors.
The processes of recording, measuring and presenting economic events through the financial statements are based on specific, generally accepted accounting principles (GAAP). In order to be helpful, the financial information should also meet certain qualitative characteristics:
- Relevance
- Reliability
- Faithful Representation
- Verifiability
- Timeliness
- Comparability, and
- Understandability
In addition, a regulatory framework, defined by the State, accounting associations or a combination of both, governs the processes of financial accounting, in order to protect the interests of the users of financial information and improve comparability. In Greece, accounting regulations are mainly defined by the International Accounting Standards (IAS/IFRS), defined by the International Accounting Standards Board (IASB), and the Greek Accounting Standards, defined by law 4308/2015, as well as other Greek legislation.
All publicly listed companies are required to use IAS/IFRS. For non-listed companies, the use of IAS/IFRS is voluntary and, when they are not used, the Greek Accounting Standards are to by applied.