Types of Accounting
Accounting is a vast and dynamic
profession and is constantly adapting itself to the specific and varying needs
of its users. Over the past few decades, accountancy has branched out into
different types of accounting to cater for the diversity of needs of its users.
Main types of accounting
are as follows:
are as follows:
Financial Accounting, or financial reporting, is the process
of producing information for external use usually in the form of financial statements. Financial Statements
reflect an entity's past performance and current position based on a set of
standards and guidelines known as GAAP (Generally Accepted Accounting
Principles). GAAP refers to the standard framework of guideline for financial
accounting used in any given jurisdiction. This generally includes accounting
standards (e.g. International Financial Reporting Standards), accounting
conventions, and rules and regulations that accountants must follow
in the preparation of the financial statements.
Management Accounting produces information primarily for
internal use by the company's management. The information produced is generally
more detailed than that produced for external use to enable effective
organization control and the fulfillment of the strategic aims and objectives
of the entity. Information may be in the form budgets and forecasts, enabling
an enterprise to plan effectively for its future or may include an assessment
based on its past performance and results. The form and content of any report
produced in the process is purely upon management's discretion.
Cost
accounting is a branch of management accounting and involves the application of
various techniques to monitor and control costs. Its application is more suited
to manufacturing concerns.
Governmental Accounting, also known as public accounting or
federal accounting, refers to the type of accounting information system used in
the public sector. This is a slight deviation from the financial accounting
system used in the private sector. The need to have a separate accounting
system for the public sector arises because of the different aims and
objectives of the state owned and privately owned institutions. Governmental
accounting ensures the financial position and performance of the public sector
institutions are set in budgetary context since financial constraints are often
a major concern of many governments. Separate rules are followed in many
jurisdictions to account for the transactions and events of public entities.
Tax Accounting refers to accounting for the tax related
matters. It is governed by the tax rules prescribed by the tax laws of a
jurisdiction. Often these rules are different from the rules that govern the
preparation of financial statements for public use (i.e. GAAP). Tax accountants
therefore adjust the financial statements prepared under financial accounting
principles to account for the differences with rules prescribed by the tax
laws. Information is then used by tax professionals to estimate tax liability
of a company and for tax planning purposes.
Forensic Accounting is the use of accounting, auditing and
investigative techniques in cases of litigation or disputes. Forensic
accountants act as expert witnesses in courts of law in civil and criminal
disputes that require an assessment of the financial effects of a loss or the
detection of a financial fraud. Common litigations where forensic accountants
are hired include insurance claims, personal injury claims, suspected fraud and
claims of professional negligence in a financial matter (e.g. business
valuation).
Project Accounting refers to the use of accounting system to
track the financial progress of a project through frequent financial reports.
Project accounting is a vital component of project management. It is a
specialized branch of management accounting with a prime focus on ensuring the
financial success of company projects such as the launch of a new product.
Project accounting can be a source of competitive advantage for
project-oriented businesses such as construction firms.
Social
Accounting, also known as Corporate Social Responsibility Reporting and
Sustainability Accounting, refers to the process of reporting implications
of an organization's activities on its ecological and social environment.
Social Accounting is primarily reported in the form of Environmental Reports
accompanying the annual reports of companies. Social Accounting is still in the
early stages of development and is considered to be a response to the growing
environmental consciousness amongst the public at large
No comments:
Post a Comment