Accounting (MBA essentials)
Overview
Financial accounting summarizes a firm’s economic activity for external stakeholders (investors, lenders, regulators) using standardized rules (e.g. GAAP, IFRS). Managerial accounting supports internal decisions: pricing, budgets, and performance measurement.
Key concepts
- The accounting equation: Assets = Liabilities + Equity.
- Double-entry bookkeeping: Every transaction has equal debits and credits.
- Financial statements: Balance sheet, income statement, cash flow statement.
- Accrual vs cash: Recognize revenue/expense when earned/incurred vs when cash moves.
- Working capital: Liquidity from receivables, inventory, and payables.
Close process (month-end)
Sample: simplified journal entry
| Account | Debit | Credit |
|---|---|---|
| Cash | 1,000 | |
| Service revenue | 1,000 |
Narrative: Record cash received for services rendered.