Accounting really is just accounting, right? It’s just keeping the books and making sure the money that comes in is greater than the money going out. Keep the ledger in the black and the job’s done. Well, not quite. Accounting as a field is full of variety because there are different accounting types, different terms, and distinct systems. There are actually eight types of accounting:
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Let’s take a more robust look at the types of accounting:
1. Financial Accounting
The primary function of financial accounting it to track, record, and report on financial transactions through created statements. The Generally Accepted Accounting Principles (GAAP) rules govern financial accounting. The Financial Accounting Standards Board (FASB) also set rules, which are designed to promote consistency in reporting processes.
2. Governmental Accounting
While financial accounting is governed by GAAP regulations, governmental accounting is under the oversight of the Governmental Accounting Standards Board (GASB), which has developed tracking and reporting standards at all levels of government. There are five general cases for government funds:
- General fund
- Permanent fund
- Special revenue fund
- Capital projects fund
- Debt services fund
3. Public Accounting
Public accounting firms provide accounting services to a variety of clients. These include, but is not limited to service business, manufacturers, retailers, and nonprofit organizations. Public accounting puts the focus on auditing, tax preparation and advisory, and consulting activity. Public accounting firms can offer financial services such as bookkeeping, accounting management, financial consulting, and payroll services.
The type of accountant you need depends on the work you need them to do.
4. Cost Accounting
Cost accounting is a specialty field which looks at the actual cost of doing business. It is often used internally and is typically used in manufacturing environments. Cost accounting looks at both fixed and variable costs that businesses incur such as materials, labor, and production costs.
5. Forensic Accounting
Forensic accounting is a combination of accounting, auditing, and investigation. It is used to investigate the financial activities of both individuals and businesses. Banks, police departments, attorneys, and businesses will use forensic accounting to examine transactions and provide findings in a completed report. Forensic accountants are hired to investigate cases of fraud or embezzlement.
6. Management Accounting
Management accounting is the form of accounting used in businesses worldwide. It is designed to provide business managers with the information they need to make educated, wise decisions.
7. Tax Accounting
The Internal Revenue Code (IRC) regulates tax accounting, and is designed to ensure that all businesses, nonprofits, and individuals obey all tax rules and regulations. Accountants work with these entities to make sure they are accurate when calculating and reporting tax liabilities.
While accounting involves tracking and reporting all of a business’ financial activities, auditing provides an independent analysis of the financial activity to ensure that a business is indeed recording transactions following the accepted rules and standards.
Whether governed by GAAP, GASP, or IRC rules and regulations, the one thing that all types of accounting have in common is their adherence to facts.
This means that whether an accountant is writing an invoice for your business, testifying in an embezzlement trial, or preparing a Fortune 500 company’s financial statements, the end result must always be factual; secure and professional accounting guarantees this accuracy.