List of Top 7 Types of Accounting
- Financial AccountingFinancial AccountingFinancial accounting refers to bookkeeping, i.e., identifying, classifying, summarizing and recording all the financial transactions in the Income Statement, Balance Sheet and Cash Flow Statement. It even includes the analysis of these financial statements.
- Project Accounting
- Managerial Accounting
- Government Accounting
- Forensic AccountingForensic AccountingForensic accounting employs a mix of accounting, auditing, and investigative acumen by recording accounting documents, preparing reports, and performing financial analysis for use in legal proceedings. Thus, it provides an accounting analysis from a litigation perspective.
- Tax Accounting
- Cost Accounting.Cost Accounting.Cost accounting is a defined stream of managerial accounting used for ascertaining the overall cost of production. It measures, records and analyzes both fixed and variable costs for this purpose.
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.
#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 statementCash Flow StatementStatement of Cash flow is a statement in financial accounting which reports the details about the cash generated and the cash outflow of the company during a particular accounting period under consideration from the different activities i.e., operating activities, investing activities and financing activities., and the statement of change in equity. Financial statements of the companyFinancial Statements Of The CompanyFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels. are prepared by adhering to the principles which are led down in Generally Accepted Accounting PrinciplesGenerally Accepted Accounting PrinciplesGenerally accepted accounting principles (GAAP) are the minimum standards and uniform guidelines for the accounting and reporting. These standards prohibit firms from engaging in unethical business activities and enable for a more accurate comparison of financial reports to investors. (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 skillsThe Accounting SkillsAccounting Skills are the set of skills required to present business transactions comprising of financial and non-financial in the books of accounts as per prescribed Standards of Accounting (US GAAP, IFRS, Ind AS) and as a part of legal compliance and analysis of business outcome in an optimum way. 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 accountingTax AccountingTax accounting is the framework that considers the tax returns instead of public financial statements disclosure while recording and presenting the business transactions in the books of accounts. It complies with the rules and policies of the company's Internal Revenue Code.. It involves compliance with various tax-related statutes along with the tax planningThe Tax PlanningTax planning is the process of minimizing the tax liability by making the best use of all available deductions, allowances, rebates, thresholds, and so on as permitted by income tax laws and rules imposed by a country's government. It contributes to better cash flow and liquidity management for taxpayers, as well as better retirement plans and investment opportunities. 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 costFixed CostFixed Cost refers to the cost or expense that is not affected by any decrease or increase in the number of units produced or sold over a short-term horizon. It is the type of cost which is not dependent on the business activity., etc. In cost accounting, all the costs will first be evaluated, and then it will be compared with the actual cost incurredCost IncurredIncurred Cost refers to an expense that a Company needs to pay in exchange for the usage of a service, product, or asset. This might include direct, indirect, production, operating, & distribution charges incurred for business operations. 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 statementIncome StatementThe income statement is one of the company's financial reports that summarizes all of the company's revenues and expenses over time in order to determine the company's profit or loss and measure its business activity over time based on user requirements., 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 –