If you’re venturing into accounting industry or thinking of starting your own accounting firm, you would be surprised to know that there are different types of accounting available. Accounting is a generic term per say and vast one. Without understating the entire concept and parts of accounting, forget about starting your accounting firm. What all you need to know about accounting? In this article, I’m going to walk you through the different types of accounting you need to know.
I ensure to develop your knowledge regarding types of accounting through this article. Without beating around the bush, let’s get started below.
Different types of accounting you must know about
Below listed are different types of accounting, which will build your knowledge about it. So, let’s read them one by one.
☞ Cash accounting
One of the first types of accounting is ‘cash accounting.’ This type of accounting is used internally to determine and check the exact cost linked to each product and service a business sells. Basically, it depicts the actual amount of doing business. Anyway, cost accounting is significant in production of goods and manufacturing environment. Cash accounting includes two costs: fixed cost and variable cost.
Fixed cost doesn’t change and variable cost based on time and items produced.
☞ Financial accounting
Second type of accounting is ‘financial accounting.’ This is one of the most commonly nearly-new accounting in every business and firm. What exactly financial accounting is? Financial accounting is a process which determines the company’s financial health to external parties such as investors, suppliers, and creditors. Why financial accounting is in use? This type of accounting is basically used to get the attention of investors and financial opportunities. If requires, financial accounting can be made public to show them the business financial health and its position.
What documents accountants use to determine the business financial health? Just read the points given below.
- – Profit and loss statement
- – Cash flow statement
- – Balance sheet
- – Statement of retained earnings
And many other documents based on company’s requirements.
☞ Tax accounting
Tax accounting begs the third place in the list. As the term suggests, this type of accounting focuses on taxation part of the business. Whether you’re an individual or running a business, managing taxation is crucial for you to grow your business and keeping accurate accounting records.
In other words, tax accounting is the procedure of recording income, expenses, and payments to determine or calculate how much taxation your business owes or dues. Once in their time, every business will determine in using tax accounting or they might hire an accounting professional or tax accountant to help you with tax accounting.
☞ Management accounting
Last but not least, management accounting as the term suggests used for internal purpose of the business. As the name itself says that management accounting helps the management team make the company’s crucial decision. Management accounting helps business team forecast future business finances and company’s budget. Additionally, management accounting is quite confidential and open to important persons of the business such as CEO, stakeholders and so on. Firms don’t go with accounting services in New York rather they choose to focus on their own so that no confidential information is out to third party.
There are three common types of management accounting which you must know about, this includes:
- 1. Strategic management
This type of management is all about monitoring and planning out massive initiatives and goals of the business.
2. Performance management
It involves of managing the performance of your business, the existing goals, and making changes to the business finances internally to meet business goals.
3. Risk management
As the term suggests, risk management helps in identifying the risk involved in the business. With risk management, businesses can identify and reduce the risk and threats.
The bottom line
Now that you have come to the end of this article, I hope that you have read all the different types of accounting mentioned above. Before starting off an accounting firm, just collect massive knowledge on the listed types of accounting. If you literally want to see your business growing, make sure to grasp profound knowledge over mentioned types of accounting I have talked above in this article.
In case, you got any query regarding accounting services, bookkeeping, payroll, or taxation, we’re here to help. Get in touch with us right away.