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. 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 external users of the information, such as investors, regulators, and suppliers. Management accounting, on the other hand, focuses on the measurement, analysis, and reporting of information for internal use by management. Tax accounting deals with tax-related matters, while cost accounting is concerned with the measurement, analysis, and reporting of costs of production of goods and services.
Regardless of the size of a business, accounting is a necessary function for decision making, cost planning, and measurement of economic performance. Accounting helps businesses understand their financial position to be able to make informed decisions and manage risks. It keeps a systematic record of the organization’s financial information, which enables users to assess the performance of a company over a period of time. Accounting is like a powerful machine where you input raw data (figures) and get processed information (financial statements) . The whole point is to give you an idea of what’s working and what’s not working so that you can fix it.
