Accounting is essentially the practice of recording, classifying, and summarizing business performance in terms of money.
There are two basic types of accounting:
• Managerial accounting is concerned with providing information to managers within an organization for the purpose of directing and controlling its operations and helping management make better financial decisions.
Financial accounting is concerned with providing information to shareholders, creditors and others who are outside the organization. It involves the preparation of documents for external reporting purposes.
Various bodies exist around the world to establish accounting rules, such as the Generally Accepted Accounting Principles, know as GAAP, in the United States and International Financial Reporting Standards, or IFRS used in Europe and over 100 countries worldwide.
Great efforts have been made in recent years towards the harmonization of international accounting practices, to allow “apples to apples” comparisons among the performance of businesses around the world.