Wednesday, July 1, 2009

Financial Accounting

Accounting is the common language used to communicate financial information from one person to another person in the world of industry and commerce. Accounting is often called the language of business. Accounting provides information that is useful in making business and economic decisions for making reasoned choices among alternatives uses of scarce resources in the conduct of business and economic activities.

Accounting is the principal means of communicating financial information to owners, lenders, managers, and others who have interest in an enterprise.

American Accounting Association defines accounting as an information system which converts inputs into outputs. The accounting system processes business transactions to provide information to various interested parties. There are external and internal users of the information produced by the accounting system of a firm. Users of accounting information are as follows:
  • Investors
  • Lenders
  • Security analysts and advisers
  • Management
  • Employees and trade unions
  • Suppliers and other trade creditors
  • Customers
  • Government and Regulatory Agencies
  • The public

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