What is Accounting?

Accounting is an information science that collects and organizes financial data for organizations and individuals. It's practical, not abstract, and helps both businesses track sales, costs, and funds, and individuals manage personal finances to avoid trouble.

Accounting helps organizations track sales, production costs, and bank balances. Similarly, individuals use accounting to manage their personal finances by monitoring income and expenses. It allows users to leverage past data to make informed decisions for the future.

There are four main types of accounting. Bookkeeping is fundamental, as bookkeepers are responsible for systematically collecting and recording all financial information, forming the basis for further accounting processes.

Financial accounting focuses on three main statements: income statement, balance sheet, and cash flow. It's prepared for external stakeholders like owners, lenders, and analysts, is highly regulated by accounting principles, and provides a comparable overview of a company's financial health.

Managerial accounting is for internal use only, providing detailed strategic information not defined by accounting principles. It covers topics like pricing, competition, marginality, and budgeting, which are kept confidential to prevent competitors from gaining an advantage. Managerial and financial accounting figures are often reconciled.

Tax accounting determines the amount of taxes a company must pay. It is a technical field that varies by legislation and will not be covered in this course. The course will focus on bookkeeping and financial accounting as core foundations.