ABSTRACT
This chapter provides an overview of basic accounting. There are two main types of accounting: financial and managerial. Financial accounting deals mostly with reporting what has happened historically. Users of financial accounting include investors, creditors, potential employees, customers, and government agencies such as the Internal Revenue Service and Securities and Exchange Commission. Most companies use the straight-line method to record depreciation in their financial statements. Most companies use the straight-line method for their financial statements because of its simplicity and its result in a constant level of depreciation expense. A company may finance a capital expenditure by leasing a building or piece of equipment. Intangible assets represent the company’s right to something. Financial accounting reports are prepared using generally accepted accounting principles. Managerial accounting relates to accounting information prepared internally to help managers make decisions for the business. The accounting process results in recording the transactions of a company for a period of time as they affect the accounting equation.
