Alright, so there are 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 when we're thinking 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 in 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 would be something like a bank, right? And you could 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 going to need to know how much money you made to know how much to tax you. Right? So they're going to require certain information about the company as well. Alright. So let us talk about the laws here in the US and internationally. So when we're going to report financial information to external users, in the US, we follow what's called the GAAP, generally accepted accounting principles. Generally accepted accounting principles, that's what we follow in the US and they're set by FASB, Financial Accounting Standards Board. Okay? So GAAP is set by FASB and that's what we'll write right here. So GAAP, this is what we call it and FASB 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 IFRS. Okay? IFRS and that's set by the International Accounting Standards Board. IASB. Okay? So we don't really have one for that, we just say IASB, but you can see that. It's easy to remember which one's the international one because they have Is right there. Right? I for IFRS, I for International Accounting Standards Board, right? And then we have GAAP and FASB in the US. So there are some differences between GAAP and IFRS. Some textbooks go into a lot of detail about this and we're going to 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 are two different sets of rules, one that's used here in the US 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? Well, we're going to 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? Well, we could have managers, right? Management of the company might want information of maybe how much it costs us per unit that we produce, right? Or marketing, the marketing department might want financial information, 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 going to focus on that in this course. This course, we're focusing here on financial accounting, alright? So that being said, let's go ahead and move on to the next video.
- 1. Introduction to Accounting1h 21m
- 2. Transaction Analysis1h 13m
- 3. Accrual Accounting Concepts2h 38m
- Accrual Accounting vs. Cash Basis Accounting10m
- Revenue Recognition and Expense Recognition24m
- Introduction to Adjusting Journal Entries and Prepaid Expenses36m
- Adjusting Entries: Supplies12m
- Adjusting Entries: Unearned Revenue11m
- Adjusting Entries: Accrued Expenses12m
- Adjusting Entries: Accrued Revenues6m
- Adjusting Entries: Depreciation16m
- Summary of Adjusting Entries7m
- Unadjusted vs Adjusted Trial Balance6m
- Closing Entries10m
- Post-Closing Trial Balance2m
- 4. Merchandising Operations2h 30m
- Service Company vs. Merchandising Company10m
- Net Sales28m
- Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory9m
- Perpetual Inventory - Purchases10m
- Perpetual Inventory - Freight Costs9m
- Perpetual Inventory - Purchase Discounts11m
- Perpetual Inventory - Purchasing Summary6m
- Periodic Inventory - Purchases14m
- Periodic Inventory - Freight Costs7m
- Periodic Inventory - Purchase Discounts10m
- Periodic Inventory - Purchasing Summary6m
- Single-step Income Statement4m
- Multi-step Income Statement17m
- Comprehensive Income2m
- 5. Inventory1h 55m
- Merchandising Company vs. Manufacturing Company6m
- Physical Inventory Count, Ownership of Goods, and Consigned Goods10m
- Specific Identification7m
- Periodic Inventory - FIFO, LIFO, and Average Cost23m
- Perpetual Inventory - FIFO, LIFO, and Average Cost31m
- Financial Statement Effects of Inventory Costing Methods10m
- Lower of Cost or Market11m
- Inventory Errors14m
- 6. Internal Controls and Reporting Cash1h 16m
- 7. Receivables and Investments3h 8m
- Types of Receivables8m
- Net Accounts Receivable: Direct Write-off Method5m
- Net Accounts Receivable: Allowance for Doubtful Accounts13m
- Net Accounts Receivable: Percentage of Sales Method9m
- Net Accounts Receivable: Aging of Receivables Method11m
- Notes Receivable25m
- Introduction to Investments in Securities13m
- Trading Securities31m
- Available-for-Sale (AFS) Securities26m
- Held-to-Maturity (HTM) Securities17m
- Equity Method25m
- 8. Long Lived Assets5h 1m
- Initial Cost of Long Lived Assets42m
- Basket (Lump-sum) Purchases13m
- Ordinary Repairs vs. Capital Improvements10m
- Depreciation: Straight Line32m
- Depreciation: Declining Balance29m
- Depreciation: Units-of-Activity28m
- Depreciation: Summary of Main Methods8m
- Depreciation for Partial Years13m
- Retirement of Plant Assets (No Proceeds)14m
- Sale of Plant Assets18m
- Change in Estimate: Depreciation21m
- Intangible Assets and Amortization17m
- Natural Resources and Depletion16m
- Asset Impairments16m
- Exchange for Similar Assets16m
- 9. Current Liabilities2h 19m
- 10. Time Value of Money1h 23m
- 11. Long Term Liabilities2h 45m
- 12. Stockholders' Equity2h 15m
- Characteristics of a Corporation17m
- Shares Authorized, Issued, and Outstanding9m
- Issuing Par Value Stock12m
- Issuing No Par Value Stock5m
- Issuing Common Stock for Assets or Services8m
- Retained Earnings14m
- Retained Earnings: Prior Period Adjustments9m
- Preferred Stock11m
- Treasury Stock9m
- Dividends and Dividend Preferences17m
- Stock Dividends10m
- Stock Splits9m
- 13. Statement of Cash Flows2h 24m
- 14. Financial Statement Analysis5h 25m
- Horizontal Analysis14m
- Vertical Analysis23m
- Common-sized Statements5m
- Trend Percentages7m
- Discontinued Operations and Extraordinary Items6m
- Introduction to Ratios8m
- Ratios: Earnings Per Share (EPS)10m
- Ratios: Working Capital and the Current Ratio14m
- Ratios: Quick (Acid Test) Ratio12m
- Ratios: Gross Profit Rate9m
- Ratios: Profit Margin7m
- Ratios: Quality of Earnings Ratio8m
- Ratios: Inventory Turnover10m
- Ratios: Average Days in Inventory9m
- Ratios: Accounts Receivable (AR) Turnover9m
- Ratios: Average Collection Period (Days Sales Outstanding)8m
- Ratios: Return on Assets (ROA)8m
- Ratios: Total Asset Turnover5m
- Ratios: Fixed Asset Turnover5m
- Ratios: Profit Margin x Asset Turnover = Return On Assets9m
- Ratios: Accounts Payable Turnover6m
- Ratios: Days Payable Outstanding (DPO)8m
- Ratios: Times Interest Earned (TIE)7m
- Ratios: Debt to Asset Ratio5m
- Ratios: Debt to Equity Ratio5m
- Ratios: Payout Ratio5m
- Ratios: Dividend Yield Ratio7m
- Ratios: Return on Equity (ROE)10m
- Ratios: DuPont Model for Return on Equity (ROE)20m
- Ratios: Free Cash Flow10m
- Ratios: Price-Earnings Ratio (PE Ratio)7m
- Ratios: Book Value per Share of Common Stock7m
- Ratios: Cash to Monthly Cash Expenses8m
- Ratios: Cash Return on Assets7m
- Ratios: Economic Return from Investing6m
- Ratios: Capital Acquisition Ratio6m
- 15. GAAP vs IFRS56m
- GAAP vs. IFRS: Introduction7m
- GAAP vs. IFRS: Classified Balance Sheet6m
- GAAP vs. IFRS: Recording Differences4m
- GAAP vs. IFRS: Adjusting Entries4m
- GAAP vs. IFRS: Merchandising3m
- GAAP vs. IFRS: Inventory3m
- GAAP vs. IFRS: Fraud, Internal Controls, and Cash3m
- GAAP vs. IFRS: Receivables2m
- GAAP vs. IFRS: Long Lived Assets5m
- GAAP vs. IFRS: Liabilities3m
- GAAP vs. IFRS: Stockholders' Equity3m
- GAAP vs. IFRS: Statement of Cash Flows5m
- GAAP vs. IFRS: Analysis and Income Statement Presentation5m
Types of Accounting - Online Tutor, Practice Problems & Exam Prep
Financial accounting focuses on creating information for external users, such as investors, creditors, and the government, following Generally Accepted Accounting Principles (GAAP) in the U.S. and International Financial Reporting Standards (IFRS) globally. In contrast, managerial accounting generates information for internal users, like management, without strict regulations. Understanding these distinctions is crucial for effective decision-making and compliance in financial reporting.
Types of Accounting: Financial and Managerial
Video transcript
Here’s what students ask on this topic:
What is the difference between financial accounting and managerial accounting?
Financial accounting focuses on creating information for external users, such as investors, creditors, and the government. It follows Generally Accepted Accounting Principles (GAAP) in the U.S. and International Financial Reporting Standards (IFRS) globally. Managerial accounting, on the other hand, generates information for internal users, like management, to aid in decision-making. Unlike financial accounting, managerial accounting does not follow strict regulations or standards, allowing companies to gather and use information as they see fit to improve internal processes and strategies.
What are Generally Accepted Accounting Principles (GAAP)?
Generally Accepted Accounting Principles (GAAP) are a set of accounting standards and guidelines used in the United States to ensure consistency, reliability, and comparability of financial statements. GAAP is established by the Financial Accounting Standards Board (FASB). These principles cover various aspects of financial reporting, including revenue recognition, balance sheet classification, and materiality. Adhering to GAAP helps companies provide accurate and transparent financial information to external users, such as investors, creditors, and regulatory agencies.
Who are the primary users of financial accounting information?
The primary users of financial accounting information are external users, including investors, creditors, and the government. Investors use this information to make informed decisions about buying, holding, or selling stock. Creditors, such as banks, use it to assess the creditworthiness of a company before lending money. The government requires financial information to ensure accurate tax reporting and compliance with regulations. These users rely on standardized financial statements to evaluate the financial health and performance of a company.
What is the role of the Financial Accounting Standards Board (FASB)?
The Financial Accounting Standards Board (FASB) is an independent organization responsible for establishing and improving Generally Accepted Accounting Principles (GAAP) in the United States. FASB's role includes developing accounting standards that ensure financial reporting is transparent, consistent, and useful for investors, creditors, and other external users. By setting these standards, FASB aims to enhance the quality of financial information, thereby promoting trust and efficiency in the financial markets.
What are International Financial Reporting Standards (IFRS)?
International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB) for global use. IFRS aims to bring consistency, transparency, and comparability to financial statements across different countries. These standards are widely adopted outside the United States and are designed to provide a common accounting language, making it easier for investors and other stakeholders to compare financial information across international boundaries.