Accounting is a very broad topic to be discussed with, which means that an Accountant should also be versed well also with the different branches of Accounting.
The following are the major branches of Accounting:
- Financial Accounting
- Managerial Accounting
- Cost Accounting
Financial Accounting
A branch of Accounting that keep tracks of the financial transactions of an entity. It deals with the activity of recording and classifying business transactions and preparing and presenting financial statements to be used by internal and external clients. The purpose of Financial Accounting is to provide enough information for others to assess the value of an entity. In preparation of financial statements, strict compliance with Generally Accepted Accounting Principles (GAAP) must be observed.
Managerial Accounting
Also known as Management Accounting deals with providing information to be used by the management. It involves financial analysis, cost analysis, budgeting and forecasting, evaluation of business decisions, and other similar areas. The purpose of Managerial Accounting is to provide relevant information periodically to the management of the business to enable it to make decisions.
Cost Accounting
Deals with the evaluating the cost of the product or service offered. It calculates the cost by considering all factors that contribute to the production of the output, both manufacturing and administrative factors, It is very useful in manufacturing business since they have the most complicated costing process. The purpose of Cost Accounting is to determine the cost of goods manufactured or produced by the business. It also helps the business in controlling costs by indicating avoidable losses and wastes.
Other branches of Accounting:
- Auditing
External auditing refers to the examination of financial statements by an independent party with the purpose of expressing an opinion as to fairness of presentation and compliance with Generally Accepted Accounting Principles (GAAP). On the other hand, Internal auditing focuses on evaluating the adequacy of the company’s internal control structure by testing segregation of duties, policies and procedures, degrees of authorization, and other controls implemented by management.
- Tax Accounting
Deals with the preparation and filing of various tax returns and dealing with their legal implications. It includes tax planning and preparation of tax returns. It also involves determination of income tax and other taxes, tax advisory, and other tax related matters.
- Fund Accounting
Deals with keeping records for funds of non-profit business entities to track the amount of cash assigned to different purposes and the usage of that cash. The focus of fund accounting is on accountability, rather than profitability.
- Government Accounting
An Accounting system implemented and followed by the government offices to record the financial transactions of the government. It includes the records of government revenue, expenditure, penalties, subsidies, grants, loans, etc. Government accounting refers to the process of recording, classifying, summarizing, and interpreting the financial transactions of the government.
- Forensic Accounting
Involves court and litigation cases, fraud investigation, claims and dispute resolutions, and other areas that involve legal matters. Aside from accounting skills, it also utilizes auditing and investigative skills to conduct an examination into a company’s financial statements. It provides an accounting analysis suitable for the court.
Sources:
https://www.accountingtools.com/articles/fund-accounting.html
https://www.accountingverse.com/accounting-basics/types-of-accounting.html
https://www.kullabs.com/classes/subjects/units/lessons/notes/note-detail/9482
