Accounting is the process of recording, summarizing, analyzing, and reporting the financial transactions of a business so that useful information becomes available for decision-making. Often called the language of business, accounting helps stakeholders understand an entity's financial health by translating raw transactional data into standardized reports. The discipline serves many different audiences and operates under several specialized branches.
The primary branches of accounting address different information needs. Financial accounting focuses on external reporting for parties outside the organization, while managerial accounting provides internal reports that guide planning and operational decisions. Tax accounting ensures compliance with tax laws, and auditing independently verifies that financial statements have been prepared faithfully.
To make financial reporting comparable across businesses, accountants follow standardized frameworks. In the United States, Generally Accepted Accounting Principles (GAAP) provide detailed, rules-based guidance, while International Financial Reporting Standards (IFRS) offer a principles-based framework adopted by most other countries. The primary users of these statements include investors, creditors, regulators, management, and employees, all of whom rely on the reports to assess profitability, liquidity, solvency, and operational efficiency.