The purpose of accounting, the difference between bookkeeping and accounting, business entities, and the accounting equation linking assets, liabilities and capital.
The purpose of accounting
Bookkeeping is the detailed recording of a business's financial transactions in the books of account. Accounting is the wider process of using those records to prepare financial statements, summarise performance and help owners make decisions.
The main reasons for keeping accounts are to:
record transactions accurately and in order,
calculate the profit or loss of the business,
show the financial position (what is owned and owed) at a point in time,
provide information to interested parties (owners, lenders, suppliers, tax authorities).
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