Accounting

Accounting is the process of recording and summarizing business transactions, both internal to a company, and external transactions with customers and suppliers, and also to create any reports required by management, creditors, shareholders and government agencies, such as the IRS or SEC.

Generally accounting can be split into two major categories - Management and Financial, although different terms are used for both. As the name implies, Management accounting is used by the management of an organization. It includes everything from highly summarized reports, to detailed cost analyses. Financial Accounting usually refers to external reporting process, which is primarily for the benefit of the shareholders, although creditors, and sometimes customers, require financial reports.

People who perform this task are called accountants. This term is very broad in that will include a part time bookkeeping clerk or the Chief Financial Officer of a large public company. Accountants may obtain a professional designation, Certified Public Accountant, or CPA, which confers certain rights and obligations.

For millennia, accounting has employed what is called "double entry bookkeeping", in which every transaction is entered as both a debit and credit. This is fundamental to the Accounting Equation which is Assets - Liabilities = Equity.

While accounting used to be done by hand, on paper, it is much more frequently done using computer programs today.