Accounting is a complex field that encompasses a variety of different disciplines. From financial accounting to cost accounting, there are many different types of accounting that are used in the business world today. In this article, we will explore the seven main types of accounting and how they are used in the business world. Financial Accounting is the most common type of accounting and is used to track, record, and report on financial transactions.
This type of accounting follows the Generally Accepted Accounting Principles (GAAP) set by the Financial Accounting Standards Board (FASB). Financial accounting provides an accurate view of a company's performance over a specific period of time in the form of financial statements. These statements are shared with external stakeholders such as investors and financial institutions. Management Accounting is another type of accounting used in companies around the world.
This type of accounting is designed to provide management with the information needed to make high-level decisions for the company. Management accounting information is shared exclusively with other members of an organization. Unlike financial accounting, which is governed by GAAP standards, management accounting is future-oriented and designs ways to operate more efficiently. Government Accounting is governed by the Government Accounting Standards Board (GASB).
This type of accounting differs from financial accounting in that government entities use separate funds to keep records of income and expenses. Government accounting provides information to help government entities make informed decisions about their finances. Public Accounting firms provide services such as auditing, tax preparation, tax advice and consulting, and the preparation and analysis of financial statements. Public accountants can also offer other financial services such as bookkeeping, accounting management, financial consulting and payroll services.
Cost Accounting is a specialized field that takes a close look at the real cost of doing business. Cost accounting is generally used in a manufacturing environment, although it can also be used for service companies. Cost accounting analyzes fixed and variable costs such as materials, labor, overhead, maintenance, and production costs. This type of accounting provides management with important information such as break-even points.
Cost accounting is considered a form of management accounting and is primarily used as an aid in the decision-making process rather than as a way of reporting on past performance.Forensic Accounting is a unique combination of accounting, auditing and investigative techniques. Forensic accountants investigate the financial activities of individuals and businesses and provide their findings in a full report. Banks, police departments, lawyers, and businesses frequently use forensic accountants to examine financial transactions.Tax Accounting is another type of accounting that focuses on taxes rather than finances. Tax accountants help individuals and businesses prepare their taxes accurately and on time.
Tax accountants also provide advice on how to minimize taxes legally and ensure compliance with tax laws.If you are just starting out in the field of Accounting, it can be overwhelming to learn about all these different types of accounting fields. However, understanding each type can help you decide which one best suits your career goals.