Financial accounting is the process of recording, classifying, and summarizing financial transactions to provide information that is useful in making business decisions. The purpose of financial accounting is to provide information that will be used by managers, investors, and creditors in making decisions about how to allocate resources. Financial accounting is governed by generally accepted accounting principles (GAAP), which are a set of rules and guidelines that specify how financial statements should be prepared.

There are two types of financial accounting: public accounting and private accounting. Public accounting firms offer accounting, auditing, and tax services to their clients. Private accounting firms provide these same services to their clients, but they may also offer management consulting and other services.

The three primary financial statements used in accounting are the balance sheet, the income statement, and the cash flow statement. The balance sheet shows a company’s assets, liabilities, and equity at a specific point in time. The income statement shows a company’s revenue and expenses over a period of time. The cash flow statement shows how a company’s cash is being used or generated over a period of time.

Accounting is important because it provides information that is useful in making business decisions. It helps managers, investors, and creditors assess a company’s financial health and performance. Additionally, accounting helps to ensure that businesses comply with laws and regulations.