Accounting is recording your business activities and capital in a specific way. This is meant to produce legal and other reports for the needs of your company and other stakeholders. For example, you can't know if your business is profitable without accounting and the investors won't know if it's worthwhile to invest in your company. In everyday life people might write down all the expenses spent on food and rent, then calculate if their salary will be enough to cover it. The basic principle for company accounting is the same, difference being that the accounting period is longer and the reports are filed to other stakeholders as well. Accounting requirements differ depending on the company type, but all companies are obliged to keep accounting.
Accounting can be single or double-entry. In single-entry accounting, a business transaction is marked to one account, when in double-entry you'll have to mark spent funds and also where the funds came from, to two separate accounts. A Private trader is the only company type that is allowed to use single-entry accounting, with certain conditions. Other company types are required to use double-entry accounting.
Accounting for internal use means various calculations made to ease up decision making and to keep track of your company's profitability. This can include budgets and key figures, which are available from your accounting records. Budget calculation for next year is easy when you can use the accounting records for the current year that are available for internal and external use.
Accounting for external use includes legal reports, which stakeholders will utilize. Different stakeholders can be clients, investors, competitors and authorities. The financial statements for Limited liability companies are a good example of accounting reports that are utilized by external stakeholders.