What is finance? Finance is a large part of a company’s operations. Finance includes activities such as acquiring and managing capital, which can consist of both the money that is invested into your company by shareholders or loans from other entities like banks. The finance department also manages cash flow, preparing budgets for management to review and decide how much should be spent in specific departments per month.

Key Takeaways

• Financial accounting is the framework that dictates the rules, processes, and standards for financial record keeping.
• Nonprofits, corporations, and small businesses use financial accountants to prepare their books and records and generate their financial reports.
• Financial reporting occurs through the use of financial statements, such as the balance sheet, income statement, statement of cash flow, and statement of changes in shareholder equity.
• Financial accounting differs from managerial accounting, as financial reporting is for reporting to external parties, while managerial accounting is for internal strategic planning.
• Financial accounting may be performed under the accrual method (recording expenses for items that have not yet been paid) or the cash method (only cash transactions are recorded).

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