Accounting consists of a set of tools that measure, classify and communicate information to make judgments and decisions by the users of data and information. An accounting system is developed which helps in fulfilling the needs of the users of information and making decisions. The steps of accounting include identification, recording and communication of financial information. Accounting information users are both, internal and external. Internal users are management personnel and employees of the company (Managerial Accounting) and external users are creditors, investors, government and customers. Accounting helps in maintaining the financial statements of the company and thereby keeping a systematic record of its transactions, helps in ascertaining the profit or loss of the business, analyses the financial position of the firm and provides the important information to its users. The accounting information and techniques should be understandable, clear and specific. They should be relevant and consistent. They should be comparable with the past performance and also with other similar firms in the market.
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