Explanation :Accounting is the process of recording financial transactions pertaining to a business. The accounting process includes summarizing, analyzing, and reporting these transactions to oversight agencies, regulators, and tax collection entities. The financial statements used in accounting are a concise summary of financial transactions over an accounting period, summarizing a company's operations, financial position, and cash flows . Since the principles of accounting rely on accurate and thorough records, bookkeeping is the foundation of accounting. Bookkeepers oftentimes have to exercise analytical skills and judgment calls when recording business events since they are the source for most accounting information in the system.
In a nutshell:
- Regardless of the size of a business, accounting is a necessary function for decision making, cost planning, and measurement of economic performance measurement.
- A bookkeeper can handle basic accounting needs, but a Certified Public Accountant (CPA) should be utilized for larger or more advanced accounting tasks.
- Two important types of accounting for businesses are managerial accounting and cost accounting. Managerial accounting helps management teams make business decisions, while cost accounting helps business owners decide how much a product should cost.
- Professional accountants follow a set of standards known as the Generally Accepted Accounting Principles (GAAP) when preparing financial statements.