Accounting

Financial accounting focuses on the preparation and reporting of financial statements for external users such as investors, creditors, and regulators. It involves recording financial transactions, summarizing financial data, and communicating the financial performance and position of an organization. Managerial accounting, on the other hand, is concerned with providing information to internal users such as management for decision-making, planning, control, and performance evaluation purposes.

The basic principles of accounting, also known as Generally Accepted Accounting Principles (GAAP), include principles such as the principle of objectivity, principle of consistency, principle of materiality, principle of conservatism, principle of relevance, and principle of matching. These principles guide the recording, presentation, and interpretation of financial information to ensure accuracy, reliability, and comparability.

The accounting equation, also known as the balance sheet equation, is Assets = Liabilities + Equity. It represents the fundamental relationship between a company's assets (resources owned or controlled), liabilities (obligations or debts owed to external parties), and equity (ownership interest or net worth). The equation must remain in balance at all times, meaning that the total assets must equal the total liabilities and equity.