Accounting: A Communication Vehicle 

Managerial Accounting & Financial Accounting

Accounting is the systematic recording, classifying, reporting, and analyzing of financial transactions of a business. It is a vehicle for communicating financial information of a business entity to many different groups of people. The communication is generally in the form of financial statements.

Accounting that provides financial information to people inside the business entity, such as managers, owner and auditors, is called management accounting or managerial accounting. Management accounting allows interpretation and analysis on the financial performance of the business in order to mainly provide a basis for making management, financial, or operating decisions. 

Accounting that provides information to people outside the business entity is called financial accounting. It provides information to shareholders, creditors or vendors, financial analysts, economists, and government agencies. Because of serving different needs of users, the presentation of financial accounts is very structured and subject to more rules than management accounting. The body of rules that governs financial accounting in a given jurisdiction is called Generally Accepted Accounting Principles, or GAAP. Other rules include International Financial Reporting Standards, or IFRS, which are principles-based standards, interpretations and the framework adopted by the International Accounting Standards Board (IASB).