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The famous branches or types of accounting include: financial accounting, managerial accounting, cost accounting, auditing, taxation, AIS, fiduciary, and forensic accounting.
1. Financial Accounting
Financial accounting involves recording and classifying business transactions, and preparing and presenting financial statements to be used by internal and external users.
In the preparation of financial statements, strict compliance with generally accepted accounting principles or GAAP is observed. Financial accounting is primarily concerned in processing historical data.
2. Managerial Accounting
Managerial or management accounting focuses on providing information for use by internal users, the management. This branch deals with the needs of the management rather than strict compliance with generally accepted accounting principles.
Managerial accounting involves financial analysis, budgeting and forecasting, cost analysis, evaluation of business decisions, and similar areas.
3. Cost Accounting
Often times considered as a subset of management accounting, cost accounting refers to the recording, presentation, and analysis of manufacturing costs. Cost accounting is very useful in manufacturing businesses since they have the most complicated costing process.
Cost accountants also analyze actual costs versus budgets or standards to help determine future courses of action regarding the company's cost management.
4. 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 GAAP. Internal auditing focuses on evaluating the adequacy of a company's internal control structure by testing segregation of duties, policies and procedures, degrees of authorization, and other controls implemented by management.
5. Tax Accounting
Tax accounting helps clients follow rules set by tax authorities. It includes tax planning and preparation of tax returns. It also involves determination of income tax and other taxes, tax advisory services such as ways to minimize taxes legally, evaluation of the consequences of tax decisions, and other tax-related matters.
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