So, what is accounting? If you search for it, you will find various answers, but the most relatable definition seems to be the following: Accounting is a system that provides useful financial information about an economic entity to information users, so that they can make rational decisions.

What is useful information in this context? If I am considering investing in the stock of a company that develops Alzheimer's drugs, there would be a lot of useful information. For example, how much the company spends on research and development each year, where the money comes from, how long they can continue if they keep needing to raise funds for R&D, what the probability of success in clinical trials is, and so on. Accounting provides all this useful information in the most rational and reliable way possible to investors.

In this case, the users of this useful information would be the stakeholders related to the company. The management would be curious, competitors would be interested, and shareholders, of course, would want to know since it's their company. Current shareholders are curious, but potential shareholders—those considering investing—would also be able to obtain useful information through accounting. The government, too, would rely on accounting to collect taxes or implement policies.

Finally, when we talk about an economic entity, we typically think of a company. However, government agencies, universities, and nonprofit organizations also have the obligation to provide information, even though their structures may differ. The same goes for individuals; in a sense, keeping a household ledger could also be considered accounting, though in this case, the users of the information would be limited to family members.

Finally, when we talk about an economic entity, we typically think of a company. However, government agencies, universities, and nonprofit organizations also have the obligation to provide information, even though their structures may differ. The same goes for individuals; in a sense, keeping a household ledger could also be considered accounting, though in this case, the users of the information would be limited to family members.

So, companies prepare various pieces of information about the business in a specific format known as financial statements. The rules governing these formats are most commonly found in IFRS and GAAP. In simple terms, these two are a set of rules for preparing financial statements. IFRS is followed by many companies around the world, while GAAP is a set of uniform rules within a country, though it is increasingly aligning with IFRS. Essentially, IFRS and GAAP are like laws related to the preparation of financial statements, and just as lawyers are professionals who deal with the law, accountants are experts in these financial statements. Of course, accountants also have expertise in other areas.