Compose a 500 words essay on Financial accounting in an economic context. Needs to be plagiarism free!Financial accounting in an economic contextCurrent assets such as cash, inventory and accounts rec

Compose a 500 words essay on Financial accounting in an economic context. Needs to be plagiarism free!

Financial accounting in an economic context

Current assets such as cash, inventory and accounts receivables are assets, which are expected to provide the economic benefits for less than one year. Liabilities are financial obligations that are owed to other entities by the company. They are classified as current or non-current depending on the time the company intends to settle the liability. Equity is the investments that are made by the shareholders of the company to the company itself. Statement of financial position assists the users to assess the financial health of a business and determine the financial risk and credit worthiness of the company. Investing in a new engine and car factories will increase the noncurrent assets owned by the company while reducing the current assets and specifically cash in hand. The decision will also affect equity. Financing the factory construction from debts will reduce the owners’ equity.

The income statement is a brief summary of the financial performance of a company over a specific accounting fiscal period. The financial performance is examined by comparing the revenues generated against the expenses incurred by the company so as to show the net profit or loss that is incurred over a specific accounting period. Construction of the companies will result in an increase in the net profit of the company. Building the factories in China, which is a lucrative market, will reduce the cost of shipping the cars as well as labor which is cheaper in China than in United Kingdom.