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Financial Accounting

Learn the toughest concepts covered in your Financial Accounting class with step-by-step video tutorials and practice problems.

1. Introduction to Accounting

Types of Accounting


Types of Accounting:Financial and Managerial

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All right. So, there's two types of accounting that you're going to focus on in your first few accounting courses. Let's see what they are. So the first one here is financial accounting. Financial accounting is going to be the focus of this course. We're going to spend all of our time dealing with financial accounting. Okay. And this is where we're creating information to report to external users. Okay. External users are people outside of the company. Alright. So, one thing about accounting, we're making information about the company and now we're making this information for people outside the company. Why would people outside the company want information about our company? Well, there could be investors, right? Investors might want to invest into our company and they want to know if they're going to make a wise decision investing in US. Alright. Another one would be creditors. So creditors that's people who lend money to the company. So, creditors, that'd be something like a bank. Right. And you can see why they would want good information about the company. Is this a good investment that they're making loaning money to the company or is it a huge risk that they're taking? Okay. And the last one here would be the government. The government would be another good example. So, when the government wants to collect taxes, well, they're gonna need to know how much money you made to know how much to tax you. Right. So they're gonna require certain information about the company as well. All right. So, let's talk about the laws here in the U. S. And internationally. So when we're gonna report financial information to external users in the US we follow what's called the gap. Generally accepted accounting principles right here. Generally accepted accounting principles. That's what we follow in the U. S. And they're set by faz be financial accounting standards board. Okay. So Gap is set by faz be and that's what we're right right here. So Gap this is what we call it. And faz be is who makes those standards? Okay. And internationally we have something similar. We have international financial reporting standards here behind me. Let me get out of the way. So we call the international financial reporting standards we call that differs. Okay? I. F. R. S. And that's set by the International Accounting Standards Board. I. A. S. B. Okay so we don't really have one for that. We just say I. S. B. But you can see that it's easy to remember which one is the international one because they have eyes right there, Right? I for I for I. For international Accounting Standards Board. Right? And then we have Gap and faz be in the U. S. So there's some differences between Gap and offers some textbooks go into a lot of detail about this and we're gonna have videos about that and some don't even talk about it at all. But it's good to know that they exist that there's two different sets of rules. One that's used here in the U. S. And one that's generally followed around the world. Okay. So financial accounting, we have these standards, we have these laws to follow. And now let's talk about managerial accounting. This is the other type of accounting right down here. And if financial accounting creates information for external users, what do you think? Managerial accounting is going to do? What we're gonna be creating information to report to internal users? Okay? So this is people inside the company. So why would people inside the company want financial information? What we could have managers, right? Management of the company might want information of maybe how much does it cost us per unit that we produce? Right. Or marketing? The marketing department might want financial information. Uh That might help them with their marketing campaigns. Right? So when we talk about the laws and the standard setting for managerial accounting, well, there are none. Right? We're not reporting this to anybody outside the company. We can do whatever we want. We want to gather whatever information we want to help us make better decisions inside the company. Nobody can stop us. Right? There's no law saying what financial information we can gather about our own company. Okay. So remember managerial accounting, We're not gonna focus on that in this course. This course we're focusing here on the financial accounting. All right. So that being said, let's go ahead and move on to the next video