Accountancy & Financial Management

What Is Financial Accounting?

Discover financial accounting, what it is, what it entails and how to take your financial accounting career to the next level.
Jasmine Mun_Writer_gradmalaysia_round
Jasmine Mun
Writer, gradmalaysia
What Is Financial Accounting?_mainphoto

Financial accountants are required in almost every type of business, be it a start-up or multinational corporation, across all sectors in Malaysia. They are responsible for ensuring the financial health of a company through duties such as keeping track of income, expenditures and tax, and ensuring regulatory compliance.

This information is compiled in financial statements that yield vital information on how a business is performing. Financial accountants may also be responsible for interpreting financial statements and providing recommendations to relevant internal and external stakeholders in order to help them make better business decisions.  

A Financial Accountant’s Key Job Tasks:

  • Preparing monthly accounts and calculating tax returns
  • Reconciling balance sheets
  • Preparing cash flow statements
  • Administering payroll and controlling income and expenditure
  • Auditing financial information
  • Analysing, compiling and presenting reports, budgets, business plans, commentaries and financial statements
  • Providing tax planning services with reference to current legislation
  • Financial forecasting and risk analysis
  • Dealing with potential insolvency cases
  • Negotiating terms of financial transactions and business deals with clients and associated organisations.

Knowledge Hub: Four Basic Financial Statements That You Need To Know

Income Statement – Also known as “Profit and Loss Statement”, it states a company’s net income for a certain period of time. It comprises a company’s total revenue minus its total expenses

Balance Sheet – Shows what a company owns (its “assets”) and owes (its “liabilities”) as of a particular date, along with the estimated value of its shareholders’ equity (e.g. Publicly-traded stocks, company shares, etc.)

Cash Flow Statement - Documents a company’s projected income and debts month by month.  This is crucial in determining the short-term survival rate of a company, by indicating whether the company has enough cash on hand to pay its employees and cover internal and external expenses and debts

Statement of Retained Earnings – This is the amount of income a company has left over after shareholders (someone who holds stocks or has shares in your company) have gotten their payouts.

Who Else Needs Financial Statements?

The work of financial accountants is also key in helping businesses convey information about the company’s performance and financial health to outside parties. In particular:

External Auditors

All registered companies in Malaysia are required by law to undergo external audits each year. So up-to-date book-keeping by financial accountants is essential to carry these audits out. Auditors will need access to both the latest and past years’ financial statements in order to obtain a true and fair view of a company’s financial performance and business dealings. Financial accountants will therefore have to assist them with that process.

External Stakeholders

Investors – To decide if a business is worth investing in

Banks – If a company wants a loan, the bank will request financial statements to check if the company has the ability to pay the loan back, and on time

Lawyers - If there’s a lawsuit or other legal action related to a company’s income or expenses, lawyers will need to be able to analyze this information

Suppliers – To help them make decisions on whether they should supply their services to the company, and what credit terms should be offered

Government Regulators – Certain state regulatory bodies may also require access to financial information to verify that the company is complying with industry-specific regulations.

Becoming A Chartered Accountant 

If you’re aiming to advance your career in financial accounting, it might be worth pursuing chartered accountant qualifications with professional bodies such as the Association of Chartered Certified Accountants (ACCA) or the Chartered Institute of Management Accountants (CIMA).

You don’t need to be a chartered accountant to begin your graduate career in financial accounting. However, certain organisations may require chartered accountant qualifications before you can advance into senior or management-level financial accounting roles. For example, a large publicly traded multinational corporation may want to staff their finance teams with chartered accountants because they need to assure regulators and shareholders that they adhere to international financial reporting standards.  

Bear in mind, however, that pursuing chartered accountant qualifications is a major investment in terms of both time and money. It is also currently not the industry standard in Malaysia for companies to offer study leave as a benefit to internal finance staff. So you will likely have to juggle work while studying for your chartered accountant certification exams as well.

In exchange, being a chartered accountant may give you a leg up when it comes to negotiating for higher pay for financial accounting roles. It may also open up alternative career pathways for you, such as switching to a different field of accounting or allowing you to offer your services to companies as a freelance financial accountant.