A great number of possible decisions could be addressed in connection with an organization.

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Organizational decisions such as these are extremely important for success. However, these examples are not made about the reporting organization. Rather, they are made within the organization in connection with some element of its operations.

The general term “accounting” refers to the communication of financial information for decision-making purposes. Accounting is then further subdivided into (a) financial accounting and (b) managerial accounting. The communication of financial information within an organization so internal decisions can be made in an appropriate manner. Financial accounting focuses on conveying relevant data (primarily to external parties) so that decisions can be made about an organization (such as Motorola or Starbucks) as a whole. Thus, questions such as the following all fall within the discussion of financial accounting:

  • Do we loan money to Company A?
  • Do we sell on credit to Company A?
  • Do we recommend that our clients buy the ownership shares of Company A?

They relate to evaluating the financial health and prospects of Company A as a whole.