The main purpose of financial accounting is to prepare financial reports that provide information about a firm's performance to external parties such as investors, creditors, and tax authorities. Managerial accounting contrasts with financial accounting in that managerial accounting is for internal decision making and does not have to follow any rules issued by standard-setting bodies.
These forms of financial reporting are the basis of information in the enterprise budgeting system, used in the development of the budgetary accounting systems. The important function of the enterprise management is budgeting. The core budget for the company is reduced to the planned income or expense.
On a company's balance sheet, accounts receivable are the money owed to that company by entities outside of the company. The change in the bad debt provision from year to year is posted to the bad debt expense account in the income statement. The second method is the direct write-off method.