Accounting is the systematic recording and reporting of financial transactions. Every sale, purchase, payment, and receipt gets logged. The records become reports that show how a business is doing. Owners use them to make decisions. Investors use them to judge whether to buy or sell. Tax authorities use them to calculate what is owed.

The field splits into several branches. Financial accounting prepares reports for outsiders. Managerial accounting serves internal decision-makers. Tax accounting focuses on compliance. Auditing checks that records are accurate. Bookkeeping is the day-to-day entry work that feeds the system. Each branch has its own rules and standards.

Accounting follows principles. Double-entry bookkeeping records every transaction in two places, so the books stay balanced. Accrual accounting counts revenue when it is earned, not when cash arrives. These conventions make statements comparable across companies and time. Without them, financial reports would be meaningless. A business can be profitable on paper and still run out of cash. Accounting reveals both sides, if you read it carefully.

Key statements

• Balance sheet
• Income statement
• Cash flow statement
• Statement of retained earnings
• Notes to the financial statements