Financial accounting involves recording, summarizing, and reporting the financial transactions of a business. The purpose of financial accounting is to provide stakeholders such as investors, creditors, and regulatory agencies with accurate and standardized financial information to assess the financial position, performance, and cash flows of the entity.

This discipline adheres to established guidelines, such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), to ensure comparability and reliability of financial statements. These standards guide how income, expenses, and other financial metrics are measured and presented. For example, a company might use financial accounting practices to prepare its annual income statement, balance sheet, and statement of cash flows for shareholders and investors to evaluate the company's profitability and efficiency.