Accounting is an indispensable part of running any business. Many companies either do the task in-house or outsource accounting services — or both. Successful accounting can expand your budget, attract new investors, increase revenue, and even improve the salaries and benefits of your employees.
Regardless of who manages your accounting, it’s wise to understand the basics, including the different types of accounting. In this article, we discuss various accounting types that range from auditing to preparing tax returns.
Financial accounting
Financial accounting is the process of recording and summarizing an organization’s financial activity and business transactions. It is essential to keep track of the company’s financial records, providing stakeholders with an overview of your financial stability for the upcoming fiscal year.
Generally, financial accounting requires detailed knowledge of the International Financial Reporting Standards or IFRS, which accountants in the Philippines must also be proficient in through the Philippine Financial Reporting Standards (PFRS). Financial accounts need to have a strong attention to detail to convey a company’s current financial state to outside sources.
Managerial accounting
This type of accounting monitors, documents, and assists in an organization’s financial planning. Its main goal is to communicate financial information to managers, assisting them in making well-informed business/operational decisions.
Contrary to financial accounting, which is primarily focused on reporting financial transactions to stakeholders, managerial accounting concentrates on internal reporting to help in decision-making.
Cost accounting
This is one of the fields of accounting under managerial accounting. Cost accountants are responsible for documenting, reviewing, and presenting manufacturing costs. They oversee all fixed and variable costs to determine if output aligns with the costs incurred to produce a product or service.
Cost accounting is helpful as it can identify where a business is spending its money and how much it earns. It aims to analyze, report, and lead to the improvement of efficiency and cost controls within the organization.
Tax accounting
Among the different types of accounting, this process is applicable not only to businesses and organizations, but also to individuals. On the corporate side, tax accounting ensures a company’s tax-related finances are legally in check, helping them stay compliant with tax codes.
One of the major advantages of outsourcing accounting services is that experienced tax accountants can help you navigate the complexities of financial records. They also assist in planning for future tax preparations, such as understanding the implications of certain tax decisions and avoiding inaccuracies that can lead to hefty fines.
Public accounting
This type of accounting field focuses on providing reports to the public regarding the fairness of the financial presentation and whether the finances are reported in accordance with the financial reporting standards. Public accountants audit, provide legal and interal control advice, assist with tax compliance, and more.
Public accounting typically employs a large number of certified public accountants. The certification designates them as qualified to conduct audits and implies a high level of accounting expertise. Additionally, public accounting firms offer other financial services such as accounting management, payroll services, complete bookkeeping, and financial consulting.
Internal Auditing
Internal auditing determines the effectiveness of internal accounting processes and controls. This involves reviewing management policies, employee departmental responsibilities, and approval procedures on related projects. In turn, internal auditing provides useful feedback to help organizations become more efficient and profitable.
Forensic accounting
Forensic accounting is a unique combination of auditing, accounting, and investigative techniques. It’s a type of accounting used to investigate a company’s financial activities. It is also commonly used by banks, attorneys, and police departments to examine financial transactions and provide those findings in completed reports.
Forensic accounting is also frequently used in cases of fraud and embezzlement and investigating money laundering activities using techniques in data collection and preparation, data analysis, and reporting methods. It’s also used to help reconstruct or recreate financial data. Some forensic accountants are also asked to testify in court to explain their findings.
Know More About the Types of Accounting to Grow Your Business with NarraSoft
Maneuvering around the different types of accounting may seem like a daunting mountain to climb, but it’s a journey well worth it. The various accounting types help you see the entire picture of your organization and can influence important financial and business decisions. From understanding your company’s tax obligations to practicing calculations, mastering the fields of accounting can only help your business grow better.
Of course, you don’t have to do all those alone. You can work with an outsourced accounting team like NarraSoft who can help you make strategic financial decisions that impact profitability.
At NarraSoft, we go beyond just bookkeeping and accounting. Our dedicated team of licensed accountants provide critical oversight and account management to help companies like yours drive performance and profitability through data-driven decisions.
Don’t hesitate to reach out to us today! Gain access to CPAs and professional accountants at a price you can definitely afford.
Other source/s: ifrs.org