Final answer:
Financial accounting is the branch of accounting that focuses on communicating an organization's financial information through financial statements to external users. It includes the creation of balance sheets, income statements, and other documents following accounting standards like GAAP or IFRS.
Step-by-step explanation:
The branch of accounting that involves communication with outsiders through financial statements is known as financial accounting.
This area of accounting focuses on the preparation and reporting of an organization's financial information to external users such as investors, creditors, regulators, and tax authorities.
The key components of financial accounting include balance sheets, income statements, statements of cash flows, and statements of changes in equity, which are structured according to established accounting standards such as GAAP or IFRS.
Preparing financial statements in a manner that is clear, reliable, and comparable is essential in financial accounting.
Professionals in this field must ensure that outsiders can make informed decisions based on the financial information provided. Hence, it plays a crucial role in maintaining transparency and integrity in the financial markets.