What is Accounting?

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Introduction to Accounting.

What is accounting? Accounting is a useful way of recording and summarizing financial information. Businesses use accounting to keep their financial information organized which helps them in making sense of their financial data and also keeps them compliant of financial regulations.

Accounting consists of 2 parts. Bookkeeping and Analysis.

Bookkeeping, which is also known as financial accounting, is the process of recording and summarizing financial information. Bookkeeping involves the recording of transactions such as sales, purchases and expenses which are then summarized and presented in the form of financial statements which show the overall health of the business. Bookkeeping helps to organize the financial data which facilitates the effective management of the business by providing key information such as how profitable the business is, such as how profitable the business is, how much money customers owe to the business, how much tax needs to be paid, and so on. Bookkeeping is the backbone of an accounting system and forms the basis of analysis in management accounting.

Management accounting provides information for decision making, planning and control of the business. For example, information relating to investment decisions, budgeting and performance measurement.

To summarize, accounting is a reliable process for recording, organizing and analyzing financial information which helps in the effective management of the business.

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“The word accounting comes from the word accountability. If you are going to be rich, you need to be accountable for your money.” - Robert Kiyosaki

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