The practice is used to prepare accounting information for people outside the organization or not involved in the day-to-day running of the company. It also helps people to store information on a company or organization that would be difficult to memorize.
Those in favor of financial accounting for a business or company, large or small, point to a number of factors which they feel are advantageous. Firstly, it allows people to measure the profitability and value of a business, rather like having a dossier of the business’s transactions you can see how well or how poorly the company is doing. It also helps when attempting to compile a company report for those outside the company, this might be for prospective buyers or investors, who wish to see a full and detailed account before becoming involved. Financial accounting and the information it generates can act like a barometer for an organization, allowing achievements and losses to be measured against rivals and competitors and produce a clear picture of where a firm stands in its particular field.
Not all are in favor of financial accounting; some believe that despite the previously mentioned advantages there are a number of disadvantages to the practice.