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Keep a chronological Prepare reports such as

log of transactions financial statements
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Users of Financial information

Financial accounting provides external Managerial accounting provides information

users with financial statements needs for internal decision makers
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 In today’s global economy, there is increased demand by external users for

comparability in accounting reports.
 This demand often arises when companies wish to raise money from
lenders and investors in different countries.
 To that end, the International Accounting Standards Board (IASB), an
independent group (consisting of individuals from many countries), issues
International Financial Reporting Standards (IFRS) that identify preferred
accounting practices.

Differences between U.S. GAAP and IFRS are decreasing as the FASB and IASB pursue a
.convergence process aimed to achieve a single set of accounting standards for global use
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Recordkeeping, or bookkeeping, is the recording of transactions and

events, either manually or electronically

Financial records:
Key bookkeeping accounts
1. Cash (regularly a debit balance): Most business transactions will go
through your cash account. The transactions can be divided between
cash receipts (debit to cash) and cash disbursement (credit to cash).
2. Accounts receivable (a debit balance): This is money due from your
customers, mainly for products and services sold for which the company
has yet to receive payment.
3. Inventory (a debit balance): This may be the ready-to-sell, work-in-
progress or raw-goods inventory. Physical counts of inventory
should take place periodically to make sure that the accounting
records agree with the actual inventory on hand.
4. Accounts payable (a credit balance): Similar to accounts receivable,
your payables usually represent money owed by the business to its
suppliers.
5. Revenue (a credit balance): Income earned by a company for
selling its products or services.
6. Expense accounts (a debit balances): These accounts record all of
the expenses incurred by the business. Expenses should be divided
into general types such as office expenses, rent, insurance and cost
of goods sold, which is a calculation based on inventory purchased
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and used in the period. Also it includes salary paid to the

employees, vacation paid, employee benefits and Employment
Insurance.
7. Owner’s Capital (a credit balance): : Also called owner’s equity, is
the equity account that shows the owners’ stake in the business.
8. Owner’s withdrawal (a debit balance): Is when an owner takes money
out of the company for personal use, sometimes called a distribution, is
a payment of cash or assets from a partnership or sole proprietorship to
one of its owners. Corporations called their shareholder payments
dividends .

Definition: The general journal is the master journal that all company
transactions or journal entries are recorded in. A typical general journal has
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at least five columns: one for the date, account titles, posting
reference, debit, and credit columns.

What Does Debit Mean in Accounting?

A debit does not mean an increase or decrease in an account. Many accounting students
make this mistake. A debit is always an entry on the left side of an account. Depending on
the account, a debit can increase or decrease the account. Accounts that have debit or left
balances include assets, expenses, and some equity accounts. This means that a debit
recorded in an asset account would increase the asset account.
Conversely, liabilities and revenue accounts have credit or right balances. A debit recorded in
a revenue account would decrease the revenue account