ACCOUNTING

what is ACCOUNTING ?

Accounting is the systematic process of measuring the economic activity of a business to provide useful information to those who make economic decisions.

Accounting is defined by the American Institute of Certified Public Accountants (AICPA) as "the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof.

Accountancy is the process of communicating financial information about a business entity to users such as shareholders and managers.

Accounting information is used in many different situations.

Bankers use accounting information when deciding whether or not to make a loan.

Stockbrokers and other financial advisers base investment recommendations on accounting information, while government regulators use accounting information to determine if firms are complying with various laws and regulations.

TYPES OF ACCOUNTING

Financial Accounting

Financial accounting provides information to decision makers who are external to the business.

Managerial Accounting

Managers make numerous decisions. These include

(1) whether to build a new plant

(2) how much to spend for advertising, research, and development

(3) whether to Buy or lease equipment and facilities

(4) whether to manufacture or buy component parts for inventory production

(5) whether to sell a certain product.

Managerial accounting provides information for these decisions.