Week 2 Introduction to Accounting

Introduction to Accounting

Accounting can be described as “the process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments.” 

Many people make decisions and informed judgments based on accounting information. Note that employees (that would be you) use accounting information as well. That is why it is important for you to have some familiarity with accounting principles, and the important statements generated by firms.

Divisions in the Accounting Field

• Financial accounting: This is the division of accounting that is concerned with producing financial statements for the organization. Note that it is primarily oriented toward external users (that is, people outside of the organization).
• Managerial Accounting: This division supports managers within the organization. A wide variety of information is produced, such as costs, budgets, production rates, labor rates, prices, and so on.
• Auditing, or public accounting: Many organizations have their financial statements reviewed by an independent third party. Public accounting firms and individual CPAs (certified public accountants) provide this auditing service.

In this course we will be dealing primarily with Financial Accounting issues and the four basic statements.