There are different types of the accounting which the organization can follow as per the scope of its work in order to cater the diversity of the need of the different stakeholders of the company and some of them include financial accounting, forensic accounting, Accounting Information System, managerial accounting, taxation, auditing, cost accounting, etc.
There are different branches of accounting, each serving a different purpose. The various accounting system helps in gathering and maintaining the records in a proper manner so that those data can be used in multiple reports. It creates a system within the business with many inherent checks to highlight the mistake or fraud.
Most common types of accounting are –
Most Common Types of Accounting
The following are different types of accounting.
#1 – Financial Accounting
It involves the process of aggregation, compiling, and production of the financial information of the company in the form of financial statements used by the stakeholders of the company. The various financial statements of the company include Balance Sheet, Profit and loss account, Cash flow statement, and the statement of change in equity. Financial statements of the company are prepared by adhering to the principles which are led down in Generally Accepted Accounting Principles (GAAP).
#2 – Project Accounting
Project accounting is the accounting that is used by the company to track the progress of the different projects undergoing from the financial perspectives. It plays an integral part in project management.
#3 – Managerial Accounting
It mainly focuses on accumulating the information to be used for internal operational reporting, i.e., it is primarily for the internal working of the company. It is more detailed than the information given to the external users of the company.
#4 – Government Accounting
Government accounting mainly focuses on the financial administration of the Government’s activities for promoting welfare to the maximum level in the form of the various services given by the Government. Thus it is concerned mainly with the systematic recording of the income and expenditures of the Government offices.
#5 – Forensic Accounting
It involves the recording of various documents and making a report, if any, required in the course of an area that involves legal matters. In it, the accounting skills are used to investigate the frauds and to do analysis on the financial statements which are used in the legal proceedings.
#6 – Tax Accounting
Accounting of the matters related to the tax comes under tax accounting. It involves compliance with various tax-related statutes along with the tax planning with the aim of preparation of tax returns. This process consists of the calculation of income tax and various other taxes and their timely payment to the tax authorities.
#7 – Cost Accounting
Cost accounting is the accounting method that is used for capturing the various cost of production of the company by assessing these costs like input cost, fixed cost, etc. In cost accounting, all the costs will first be evaluated, and then it will be compared with the actual cost incurred by the company to analyze the variance thereof. Based on the basis, the company can take corrective actions in a far better way.
Accounting means gathering of various records and arranging and recording them systematically so as they become useful data. It is done to prepare the three main statements, which are income statement, balance sheet, and cash flow statement. Apart from this, several other MIS reports as and when required are also prepared. It calculates the profit or loss of any business for a given period and the nature & value of a company owner’s equity, assets, and liabilities.
Moreover, the accounting results can be compared with the previous year’s result to know the weak points of the business. It helps in decision-making by the management. This information can be produced as evidence in any legal matter. The non-monetary items are not recorded. Sometimes these are dressed to falsely show the accurate and fair view in the financial statement. It doesn’t account for the value of money, and hence financial results are without giving weightage to a value of money.
This article has been a guide to Types of Accounting. Here we discuss the top 7 types of accounting with detailed explanations along with some examples. You can learn more about accounting from following articles –