As soon as your accounting period ends, financial accounting begins. All reporting, collecting, and summarizing of financial data is done during this stage.
Financial accounting follows pre-determined accounting principles to help businesses compile data into financial statements like balance sheets, income statements, and cash flow statements. Startups use these records to better understand finances, answer questions investors or lenders may have, and prepare reports.
It’s important to follow specific guidelines like GAAP to ensure accuracy. This will help build trust with investors and maintain transparency on finances.