Accounting is the process of recording, classifying, and summarizing financial transactions of economic entities such as businesses and corporations. It measures the results of an organizations economic activities and conveys this information to a variety of stakeholders, including investors, creditors, management, and regulators. Practitioners of accounting are known as accountants. The terms "accounting" and "financial reporting" are often used as synonyms.
Accounting can be divided into several fields including financial accounting, management accounting, tax accounting, and cost accounting. Financial accounting focuses on the reporting of an organizations financial information, including the preparation of financial statements, to the external users of the information, such as investors, regulators, and suppliers. Management accounting focuses on the measurement, analysis, and reporting of financial and non-financial information that helps management teams make business decisions. Tax accounting focuses on tax-related issues, such as tax planning and compliance with tax laws. Cost accounting focuses on the measurement, analysis, and reporting of costs associated with the production of goods or services.
Regardless of the size of a business, accounting is a necessary function for decision making, cost planning, and measurement of economic performance. A bookkeeper can handle basic accounting needs, but a Certified Public Accountant (CPA) should be utilized for larger or more advanced accounting tasks. Accounting requires meticulous record-keeping and financial transaction tracking year-round. Moreover, keeping accurate records helps ensure a business is prepared to file taxes, present information to investors, or even apply for a loan.
