Introduction to Accounting

Definition

• Accounting: A useful way of recording and summarizing financial information.
• Purpose: Helps businesses organize financial information for better understanding and compliance with financial regulations.

Components of Accounting

1. Bookkeeping (Financial Accounting)

   • Process: Recording and summarizing transactions (sales, purchases, expenses).
   • Output: Financial statements showing business health.
   • Benefits:
     • Determines profitability.
     • Tracks money owed to lenders and by customers.
     • Calculates taxes owed.
   • Role: Backbone of the accounting system; foundation for management analysis.

2. Management Accounting

   • Purpose: Provides information for decision-making, planning, and control.
   • Application: Investment decisions, budgeting, performance measurement.

Summary

• Accounting: Essential for recording, organizing, and analyzing financial information.
• Supports effective business management.

Outro

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