Want to know the financial position of your business and the status of its operations? You probably need an accountant to get the job done in a professional way. Of course, you would like to analyze your cash flow statement along with all monetary matters. Without any doubt, the support of a certified accounting firm or a professional is mandatory to drive an outcome.
No matter if you are running a small to medium or large firm, you have to be familiar with the branches of accounting to determine the areas of finance linked with your business. With appropriate knowledge of accounting branches, you will be able to conduct a thorough financial analysis of your organization.
Table of Contents
What are Accounting Branches?
Accounting is a process of keeping financial accounts that has several branches that come up with different goals and utilization. Every accounting branch has different aspects that lead to smooth financial management outcomes and ultimately enhance the decision-making abilities of a firm. Let’s overview the twelve types of accounting branches, their uses, and how they work!
Financial Accounting
Financial accounting is the most popular accounting service that records and categorizes the transactions to be done for business. However, an accountant who handles this financial responsibility gets historical data from the past and prepares financial statements based on the data gathered from the transactions. Additionally, an expert prepares a balance sheet and income statement, keeping in mind the general principles of accounting and finance.
Further, financial accounting takes care of external matters, and it’s a process of analyzing a company’s profit and loss statements that play an advisory role in helping management and stakeholders make smart decisions to improve the financial worth of a company.
Cost Accounting
Cost accounting is one of the major branches of accounting that has a strong connection with a company’s operations. Usually, it exists in manufacturing firms where resources handle cost matters and analyze manufacturing costs for the business.
Cost accounting is an internal strategy that revolves within the boundary of an organization, and more likely, experts deal with fixed and variable cost factors to record and manage cost items using accounting tools.
Therefore, an accounting specialist monitors the campaign budget and decides when to reduce the cost and when to spend more according to the venture’s financial situation. So, an accountant evaluates every project cost, keeping in view the manufacturing cost and factors included in the entire process. With this, the company finds ways and solutions to take a right monetary actions.
Auditing
Auditing is a branch of accounting that deals with the evaluation of a business and how it performs financial responsibilities. However, an auditor examines and monitors a business by preparing reports covering tax and financial details. Further, there are two types of audits:
- Internal audits.
- External audits.
An external audit takes place under the supervision of an outside audit team that is also known as a third-party audit team. The auditors examine the financial statements and figure out the performance of the company. Internal audits take place by auditors from within the organization. These auditors keep an eye on tax issues and interact with stakeholders to avoid conflicts.
Managerial Accounting
Managerial accounting is a branch of accounting that links to the managerial aspects of a firm. It is also famous as a management accounting that concentrates more on the use of money. It’s a managerial responsibility that allows an accountant to make wise decisions regarding operations.
With this, an accountant must maintain and provide the data to stakeholders and owners to monitor cost analysis elements and administrative decisions. Of course, the chances of improvement are bright with the implementation of managerial accounting.
Accounting Information Systems
Accounting information systems is known as AIS; it’s a branch of accounting that deals with the system and process of accounting. In this type, a certified accountant goes through a software management process and interacts with employees to efficiently handle the bookkeeping management. If we go into more detail, we find this accounting system best for decision-makers who collect, store and process financial and accounting data.
Tax Accounting
Tax accounting is an important type that deals with tax matters. In this field, an accountant prepares tax returns for individuals and businesses according to the rules and regulations of tax law. It’s an essential branch of accounting that assists companies with legal matters and acts as an advisory service regarding the consequences of tax decisions. Hence, a tax accountant is responsible for calculating income tax and other taxes that have an impact on business.
Forensic Accounting
Forensic accounting is another important type of accounting that deals with the legal affairs of an organization. If a company faces fraud and undergoes disputes, then forensic accounting comes into action and experts prepare financial data when documents are incomplete and inaccurate.
Furthermore, these accountants usually work as consultants and perform ad-hoc duties. Hence, they make utmost efforts to prevent fraudulent activities by keeping a check on the cash accounting system.
Fiduciary Accounting
Fiduciary accounting is another type of accounting that covers the management of property for an individual or business. This accounting covers activities that are linked to administration and property matters. It includes trust accounting, estate accounting, and the process of tracking receipts of custodians and guardians. So, fiduciary accounting takes place before a person goes bankrupt, and this type of accounting helps protect business assets.
Government Accounting
Government accounting is famous as public accounting, which takes care of disbursements and federal funds allocation. However, welfare funds also come into action when we talk about public accounting and agencies involved in this process.
Therefore, an accountant is responsible for tracking the movement of money within or outside the firm. For this, an expert always considers the budget and works with the state on different programs. The federal programs cover healthcare, education, and housing schemes.
International Accounting
International accounting deals with the growth and expansion of international markets. This particular branch of accounting deals with specific laws and regulations to practice fair business policies. Interestingly, an international accountant has to be well aware of the financial and managerial accounting process to meet financial reporting standards.
Fund Accounting
Fund accounting is a type of accounting that links with non-profit organizations. Every accountant who takes care of fund accounting has to work with non-profit firms to make sure that funds are utilized properly and accurately.
For this, company policy matters a lot and should be forward according to the laws and regulations of NPOs to avoid conflicts and issues. Fund accounting further connects an accountant with churches, charities, hospitals, educational institutes, clubs, and government agencies.
Political Campaign Accounting
Political campaign accounting is a crucial accounting type that is strongly linked to the development of the finance system. It’s a political campaign process that deals with transactions and monitors donations regularly. Make sure the federal and state laws come into action when running political campaign accounting. Interestingly, the accounting process can be practiced locally and nationwide.
Wrap Up
Finally, we have discussed twelve key branches of accounting along with their uses and work. All types are equally important, but without implementing financial and auditing services, the accounting and finance process can’t work smoothly. These are the pillar services that assist other services simultaneously.
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