SmallBusiness.com: The free small business resource
Accounting is the measurement, disclosure or provision of assurance about information that helps managers and other decision makers make resource allocation decisions.
Financial accounting is one branch of accounting and historically has involved processes by which financial information about a business is recorded, classified, summarized, interpreted, and communicated. Auditing, a related but separate discipline, is the process whereby an independent auditor examines an organization's financial statements in order to express an opinion -- that conveys reasonable but not absolute assurance -- as to the fairness and adherence to generally accepted accounting principles (GAPP), in all material respects.
Accounting attempts to create accurate financial reports that are useful to managers, regulators, and other stakeholders such as shareholders, creditors, or owners. The day-to-day record-keeping involved in this process is known as bookkeeping.
At the heart of modern financial accounting is the double-entry book-keeping system.
This system involves making at least two entries for every transaction: a debit in one account, and a corresponding credit in another account. The sum of all debits should always equal the sum of all credits. This provides an easy way to check for errors.