Accounting

Accounting or accountancy is the measurement, processing and communication of financial information about economic entities. It was established by the Italian mathematician Luca Pacioli, in 1494. Accounting, which has been called the "language of business", measures the results of an organization's economic activities and conveys this information to a variety of users including investors, creditors, management, and regulators. Practitioners of accounting are known as accountants. The terms accounting and financial reporting are often used as synonyms.

Accounting can be divided into several fields including financial accounting, management accounting, auditing, and tax accounting. Financial accounting focuses on the reporting of an organization's financial information, including the preparation of financial statements, to external users of the information, such as investors, regulators and suppliers; and management accounting focuses on the measurement, analysis and reporting of information for internal use by management. The recording of financial transactions, so that summaries of the financials may be presented in financial reports, is known as bookkeeping, of which double-entry bookkeeping is the most common system.

Accounting is facilitated by accounting organizations such as standard-setters, accounting firms and professional bodies. Financial statements are usually audited by accounting firms, and are prepared in accordance with generally accepted accounting principles(GAAP). GAAP is set by various standard-setting organizations such as the Financial Accounting Standards Board (FASB) in the United States, and the Financial Reporting Council in the United Kingdom. As of 2012, "all major economies" have plans to convergetowards or adopt the International Financial Reporting Standards (IFRS).

Financial accounting

Main article: Financial accounting

Financial accounting focuses on the reporting of an organization's financial information to external users of the information, such asinvestors, regulators and suppliers. It measures and records business transactions and prepares financial statements for the external users in accordance with generally accepted accounting principles (GAAP). GAAP, in turn, arises from the wide agreement betweenaccounting theory and practice, and change over time to meet the needs of decision-makers.

Financial accounting produces past-oriented reports—for example the financial statements prepared in 2006 reports on performance in 2005—on an annual or quarterly basis, generally about the organization as a whole.

Management accounting

Main article: Management accounting

Management accounting focuses on the measurement, analysis and reporting of information that can help managers in making decisions to fulfil the goals of an organization. In management accounting, internal measures and reports are based on cost-benefit analysis, and are not required to follow GAAP. In 2014 CIMA created the Global Management Accounting Principles (GMAPs). The result of research from across 20 countries in five continents, the principles aim to guide best practice in the discipline.

Management accounting produces future-oriented reports—for example the budget for 2006 is prepared in 2005—and the time span of reports varies widely. Such reports may include both financial and nonfinancial information, and may, for example, focus on specific products and departments.

Auditing

Main articles: Financial audit and Internal audit

Auditing is the verification of assertions made by others regarding a payoff, and in the context of accounting it is the "unbiasedexamination and evaluation of the financial statements of an organization".

An audit of financial statements aims to express or disclaim an opinion on the financial statements. The auditor expresses an opinion on the fairness with which the financial statements presents the financial position, results of operations, and cash flows of an entity, in accordance with GAAP and "in all material respects". An auditor is also required to identify circumstances in which GAAP has not been consistently observed.

Source : https://en.wikipedia.org/wiki/Accounting