| Accounting concerns a system providing | | | | The format of all these accounts is to be |
| qualitative information about finances. It may | | | | determined in conformance with certain standards. |
| relate to maintaining of a chronological list of | | | | The financial statements obtained will show the |
| related debits and credits of a business, the | | | | income and expenditure for the company and |
| statement of transactions and the resulting | | | | present a summary of the assets, liabilities and |
| balance. Accounting methodology or accounting | | | | shareholders' or owners' equity in the company on |
| system is a part of a ledger of accounts. The | | | | the date of preparation of the accounts. |
| methodology of accounting involves | | | | Financial accounting is primarily needed to reduce |
| measurement, disclosure or provision of | | | | the problems which arise under conditions of |
| assurance about financial information. This comes | | | | incomplete and asymmetric information (wherein |
| of help for managers, investors, tax authorities | | | | one party is better informed than the other) |
| and such others who take the crucial decisions for | | | | when a principal hires an agent. |
| resource allocation. | | | | The measurements of financial transactions form |
| Financial accounting is a branch of accounting and | | | | the essence of accounting. These are the |
| is often considered to be synonymous with | | | | transfers of legal property rights as made under |
| accounting. It involves processes by which financial | | | | contractual relationships. Non-financial transactions |
| information related to any business is accounted | | | | are specifically excluded from the ambit of |
| (i.e. recorded, classified and summarized), | | | | accounting. |
| interpreted and communicated. This relates to the | | | | The day to day record keeping involved in |
| preparation of financial statements for decision | | | | accounting is called bookkeeping. The double-entry |
| makers - stockholders, suppliers, banks, | | | | bookkeeping system lies at the core of modern |
| government agencies, owners etc. | | | | financial accounting. As per this system at least |
| In financial accounting the main concerns taken up | | | | two entries for every transaction needs to be |
| are the accounting equation (i.e. assets equal sum | | | | made- a debit in one account and a corresponding |
| of liabilities and owners' equity) and the financial | | | | credit in another. The sum of debits should always |
| statements. The financial statements are | | | | equal the sum of credits as a rule. This makes it |
| prepared based on the trial balance. This trial | | | | easy to check out for errors. |
| balance is again prepared using the double entry | | | | The object of accountancy is to prepare and |
| accounting system. The figures appearing in the | | | | provide accurate financial reports which managers, |
| trial balance are rearranged and a profit and loss | | | | regulators, shareholders, creditors or owners find |
| statement and a balance sheet are prepared. | | | | worthwhile. |