What is the primary goal of financial accounting?

The primary goal of financial accounting is to report financial information to external parties. This involves preparing and presenting financial statements, such as the balance sheet, income statement, and cash flow statement, that provide a clear and standardized view of a company's financial performance and position over a specified period. External parties include investors, creditors, regulators, and other stakeholders who need reliable financial data to make informed decisions regarding their engagement with the company.

This role of financial accounting is crucial because it ensures transparency and consistency in financial reporting, allowing stakeholders to assess the viability and stability of the business. The information provided through financial accounting serves not only to evaluate the company's current financial health but also to predict future performance.

While internal reporting, risk assessment, and tax calculations are important functions within an organization, they fall more under managerial accounting, risk management, and tax accounting, respectively, which are aimed primarily at supporting internal decisions rather than fulfilling the needs of external stakeholders. Thus, the focus on external reporting distinctly characterizes financial accounting's primary goal.