MaRS Library Accounting: An introduction
Accounting is the language of business. It is the means by which financial information is communicated about a company to interested parties. These stakeholders, or users, may include the owners of the company, its managers, investors (or potential ones), analysts, bankers, government agencies, customers and suppliers. The information provided through financial statements tells the user about the company’s past performance and helps forecast its future peformance. Additionally, this financial tracking shines a light on the activity of the managers of the company and creates corporate accountability.
Accounting is vital because key decisions that can affect the economic well-being of your company (including its managers and shareholders) are made on the basis of what your financial statements convey. For example, depending on what they see, investors may choose to invest or withdraw their funds, or bankers may decide to adjust their interest rate, or extend or reject a loan.
In general, accounting has two divisions. Financial accounting, which is prepared on behalf of the company for the use of external stakeholders and their decision-making processes, and management accounting, which is conducted internally to optimize business areas such as strategic planning, finance, operations, human resources and sales and marketing.
Markle, K. (2004, August). Introduction to Accounting. Presentation delivered at Schulich School of Business, York University, Toronto, Canada.
Pratt, Jamie. (2003). Financial Accounting in an Economic Context. New York: John Wiley & Sons.
http://www.cma-canada.org/index.cfm?ci_id=4442&la_id=1. Retrieved October 22, 2008.