The Seven Main Types Of Accounting
Accounting is a profession that is very broad and dynamic; it has to be constantly changing to fit the various and specific needs of those who use it. There are quite a few different types of accounting aimed to supply the specific requirements for the variety of accounting users.
Here are the main types of accounting and a brief explanation of each:
1. Financial Accounting
Financial Accounting also known as Financial Reporting is the process in which information for external users is produced; this can be done in the form of financial statements. A financial statement will reflect the past performance and current position of an entity based on a fixed set of guidelines and standards called Generally Accepted Accounting Principles (GAAP).
2. Management Accounting
Management Accounting is information which is produced by the company’s management for internal use. The internal information is more accurate than the external information; the purpose is to have more efficient control over the organization as well as a way to reach individual strategic goals and objectives the company has in place. The information provided is a forecast or budget. A branch of Management Accounting is Cost Accounting, this involves using certain techniques as of form of monitoring and controlling costs.
3. Governmental Accounting
Governmental Accounting also known as Federal Accounting or Public Accounting, this type of accounting information system is the one used in the public sector. There is a bit of a difference with the Financial Accounting system utilized in the public sector, and that applied in the industry.
4. Tax Accounting
Tax Accounting is for tax-related situations. This industry governed by the specific tax rules instituted by the tax laws of the jurisdiction. These rules are different than the ones who rule over the preparation of the financial statements that are for public use. The financial statements prepared under the principles of financial accounting are adjusted by tax accountants to account for the differences in the rules prescribed by the tax laws.
5. Forensic Accounting
Forensic Accounting uses accounting and auditing as well as investigative methods in cases of dispute or litigation. A forensic accountant will summon an expert in courts of law in both criminal and civil disputes which require analyzing the financial consequences of an inevitable loss as well as to detect fraud. A forensic accountant may need their services in cases of personal injury claims, a complaint involving professional negligence in a financial way, insurance claims, suspected fraud, etc.
6. Project Accounting
Project Accounting is an accounting system which is used to follow the economic progress of a particular project with the use of frequent financial reports as this is a very vital aspect of project management. This management accounting branch is specialized to focus on guaranteeing the financial success of the company’s projects such as opening a new business office.
7. Social Accounting
Social Accounting is also known as Sustainability Accounting and Corporate Social Responsibility. Considered a sector that focuses on reporting implications of company activities on its social and ecological environment. This form of accounting reported with the use of Environmental Reports which accompany the companies annual reports. This type of accounting is relatively new and is considered to be due to the environmental consciousness which seems to be growing with the general public.
These are the seven main types of accounting. The accounting services you or your company may need could vary depending on each situation, it is best to look for the advice of a tax consultant and see which accounting services would help you and your company the most and which ones are an absolute must.