Explain the different branches of accounting
Answers
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
Sometimes 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 and standard costs to help managers determine future courses of action regarding the company's operations.
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.
6. Accounting Information Systems
Accounting information systems (AIS) involves the development, installation, implementation, and monitoring of accounting procedures and systems used in the accounting process. It includes the employment of business forms, accounting personnel direction, and software management.
7. Fiduciary Accounting
Fiduciary accounting involves handling of accounts managed by a person entrusted with the custody and management of property of or for the benefit of another person. Examples of fiduciary accounting include trust accounting, receivership, and estate accounting.
8. Forensic Accounting
Forensic accounting involves court and litigation cases, fraud investigation, claims and dispute resolution, and other areas that involve legal matters. This is one of the popular trends in accounting today.
Answer:
According to McAdam & Co., there are three primary types of accounting, even though there are twelve accounting branches. These categories include managerial accounting, financial accounting, and tax accounting. All firms can benefit from management accounting, and the IRS requires tax accounting.
Explanation:
Different branches of accounting
1. Financial Accounting
Recording and classifying company activities and creating and presenting financial statements for internal and external users are all part of financial accounting.
Strict adherence to generally accepted accounting standards, or GAAP, is maintained while compiling financial accounts. Historical data processing is the main focus of financial accounting.
2. Managerial Accounting
Information delivery to internal users and the management is the main goal of managerial or management accounting. The demands of the management are the focus of this branch rather than rigorous adherence to generally accepted accounting rules.
Financial analysis, planning and forecasting, cost analysis, decision-making assessment, and other related topics are all included in managerial accounting.
3. Cost Accounting
Cost accounting describes the recording, display, and analysis of manufacturing costs and is occasionally seen as a part of management accounting. Manufacturing companies utilize cost accounting extensively because their costing processes are the most intricate.
Cost accountants also examine standard and real expenses to aid managers in planning the future of the business' operations.
4. Auditing
To offer an opinion about the fairness of the presentation and compliance with GAAP, external auditing is the process of having a third party independently examine financial statements. The main goal of internal auditing is to assess the effectiveness of an organization's internal control system by examining the division of roles, rules and procedures, levels of authorization, and other management-implemented controls.
5. Tax Accounting
Clients who use tax accounting benefit from assistance in adhering to tax authorities' requirements. Tax return filing and tax planning are included. Calculating income tax and other taxes, tax counseling services such as lawfully reducing taxes, assessing the effects of tax decisions, and other tax-related issues are also included.
6. Accounting Information Systems
The creation, installation, implementation, and oversight of the accounting systems and processes utilized in the accounting process include accounting information systems (AIS). It covers business forms, managing accounting staff, and managing software.
7. Fiduciary Accounting
The processing of accounts by a person entrusted with the custody and administration of property belonging to or used for the benefit of another person is known as fiduciary accounting. Trust accounting, receivership, and estate accounting are a few instances of fiduciary accounting.
8. Forensic Accounting
Investigations into fraud, claims and dispute settlement, court and litigation situations, and other legal issues are all part of forensic accounting. One of the current trends in accounting is this.