Accountant Jobs - What Is Accounting ? [TYPEWRITER CLICKING] NARRATOR: What is accounting? Accounting is the language of business. Well, what is business? Well, you could say businesses like somebody taking a hammer, building a house, and then taking his stuff that he made and selling it to somebody with money. Then they make their exchange, and it's all good. Another way to look at business is that it is a magical box. You take raw materials, put it in the box, and then it comes out as goods that you can then sell and make money. That box is business. So let's say you have a business you make something that costs you $100 to make and you sell it for 200. You have a profit of $100, and you're happy I just told you a story about a business that made $100. So who should we tell our story to? You might want to tell your story to banks or investors. Banks or investors want to hear your story because they might want to lend you money or invest money in your business. Another person who wants to hear your story is Uncle Sam. He wants to tax you. We can break it down into three different people that want to hear your story, people on the inside, or internal users, people on the outside, external users, or the government. The language by which you tell these people's stories is sometimes called managerial accounting for internal users, financial accounting for external users, and then tax accounting for government users. If you ever take an accounting class, it's usually going to be called managerial, financial, or tax. The actual language that external users want to hear your information in is GAAP, G-A-A-P, which stands for Generally Accepted Accounting Principles. The government wants to hear your story based on the Internal Revenue code. That is the standard by which you must tell your story. Now, internal users, what's the name of the language that they want to hear? It's actually whatever you want. There is no standard managerial accounting language. If you're a business and you're talking to an external user, you want to look good or show that you made a high profit. Everyone wants to brag about how good their business is doing. However, when you talk to the government, your objective is to make it look like you made nothing, because if you're rich, they'll take all your money. Now, if you're talking to an internal user, your objective isn't really to look good or to look like you made nothing. It's really just to tell it as accurately as you can, because that's the information upon which managers and decision makers will make decisions. Now your story might be the exact same story in every instance. But depending on who your audience is, you're going to use a different language. And each of these languages will actually tell a different story, even though it's based on the same actions of the business. In review, accounting is the language of business. Businesses when you do stuff for profit. When you tell the story of your business, you're going to be telling it to one of a few different options. Internal users want to hear your story based on the language of managerial accounting. External users want to hear it based on GAAP. And the government wants to hear it based on the tax code. For more videos like this visit, www.AccountingWITT.com.