What is accounting?
Accounting is the process by which financial information about a business is recorded and analysed. The key parts of accounting are asset accounting, liability accounting, equity accounting and income statement accounting.
In accounting financial statements are used which are a condensed version of the most important financial transactions of a business, government organization, or other institution.
You may have heard accounting and bookkeeping used interchangeably. But they are two different types of financial record-keeping. Accounting refers to the records created over an annual cycle, like receiving and disbursing cash; calculating closing corporate profit or loss statements and taxes owed to the government.
Bookkeeping refers to lists, journals and ledgers of transactions, maintaining debit note and credit note and other financial activities that are either processed manually or on a computer database program
Who handles accounting?
It is the job of an accountant to compile and interpret financial information for their clients so that they can make well-informed decisions about their businesses
Accountants come in many guises, but they generally can be categorized into three distinct areas:
- Accountants who work in the public sector are employed by government agencies, non-profit organizations or educational institutions. These accountants provide a broad range of services to their clients. For example, tax accountants prepare income tax returns for individuals and corporations.
- Government accountants work for federal, state or local governments and often specialize in auditing and budgeting.
- Finally, corporate accountants work for either publicly traded or privately held companies. They may perform a wide range of duties depending on the size of their employer’s organization.
Accounting is a dynamic profession. The field is changing rapidly as accountants seek new ways to provide services to their clients and employers seek new ways to incorporate accounting into their businesses.
Consequently, many accounting students are choosing to specialize in an area such as corporate taxation, international accounting, management accounting, or forensic accounting.
What are the different types of accounting?
There are three main types of accounting which include:
This type of accounting shows the complete way of life for businesses all over the world. Financial accounting refers to a set of processes used for the preparation of financial statements to summarize the financial performance and standing of a business.
The output of financial accounting is commonly referred to as accounting information, financial information or simply “the numbers.” The results of financial accounting are reflected in the cash flow statement, balance sheet or income statement.
Managerial accounting looks at data in new and different ways to help a company achieve its goals and make informed decisions. To do this the managers need to rely on monthly or quarterly data.
Managerial accounting outlines how to operate a company through the use of performance reports and analysis tools that are customized for the business needs. This type of accounting relies heavily on forecasting, budgeting and the use of different financial analysis tools.
This type of accounting is used while taking decisions related to costs and expenditures. Hence it deals with the investment required to make a product which in turn helps in deciding what the selling price of the product should be.
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