Financial accounting is the systematic process of recording, summarizing, and communicating a company's financial transactions and performance to external stakeholders. It involves preparing financial statements, such as the income statement, balance sheet, and cash flow statement, following generally accepted accounting principles (GAAP) or international financial reporting standards (IFRS). Financial accounting provides a transparent and standardized view of a business's financial health, aiding investors, creditors, and regulators in assessing its viability and making informed decisions.