Explore Accounting

What is Accounting?

Accounting is the process of recording, classifying, and summarizing financial transactions to provide information that is useful in making business decisions. The purpose of accounting is to create financial statements that show an organization's financial health. Stakeholders then use this information to make decisions about where to allocate financial resources.

The four most common areas of focus in accounting are financial accounting, managerial accounting, tax accounting, and government accounting. These are some of the most common jobs that accounting students pursue.

Financial accountants track and synthesize financial transactions for a business. Financial accountants produce balance sheets, income statements, and cash flow statements that are useful in making decisions about resource allocation and investments. For example, financial accounting information can be used to decide whether to invest in a company or to provide loans to a company.

Managerial accountants provide information and insights to managers to make decisions about allocating resources within an organization. Managerial accounting differs from financial accounting in that it focuses on providing information for decision-makers within the company rather than shareholders and other external parties. Financial accounting focuses on historical data and reports, while managerial accounting focuses on providing information that can be used to make future decisions.

Tax accountants prepare and file taxes. This includes calculating how much tax is owed, as well as filing the necessary paperwork with the government. Tax accountants may also provide advice on financial planning and investment strategies. As a result, they play an important role in helping individuals and businesses manage their finances.

Government accountants record, classify, and summarize financial transactions to provide information that is useful in making decisions about the allocation of resources. The primary users of government accounting information are elected officials, government employees, and citizens. For example, elected officials need information about the overall financial condition of the government to make informed decisions about expenditures.