Accounting is a very broad and dynamic profession. Accounting or Accountancy is the measurement, processing and communication of financial information of an entity. The entity could be anything, a big nation of 4 million people or an organization of 400 employees or a family of 4.
Accounting field is evolving by adopting to the various needs of organizations at every level. However, there are 7 major types of accounting:
- Financial Accounting
- Management Accounting
- Governmental Accounting
- Tax Accounting
- Forensic Accounting
- Project Accounting
- Social Accounting
Also known as financial reporting, it is the process of generating financial information for external use, generally in the form of financial statements. Financial Statements reflect an organization’s past performance and current position based on certain accounting standards. This generally includes accounting standards (e.g. International Financial Reporting Standards), accounting conventions, and rules and regulations that accountants are supposed to follow in the preparation of the financial statements.
These professionals produce information primarily for internal use by the company’s management. The information produced is mostly more detailed than that made for external use to enable effective control within the organization and the fulfilment of the strategic objectives of the organization. Information may take the form of budgets and forecasts, enabling planning effectively for the future. Can also include assessment of its past performance and results. One of its branches, cost accounting, involves the application of various techniques for monitoring and controlling costs. Its application is most suited to manufacturing concerns.
Governmental Accounting, also known as public accounting, refers to the type of accounting system used in the public sector. The need to have a separate accounting system for the public sector arises because of the different objectives of the state and privately owned institutions.
Governmental accounting makes sure the financial position and performance of the public sector institutions are set within the budgetary constraints.
This term refers to accounting for the tax related matters. It is governed by the tax rules prescribed by the tax laws of a jurisdiction. The tax rules differ slightly from the GAAP rules, in order to account for the differences, Tax accountants adjust the financial statements prepared under financial accounting principles with rules given by the tax laws. This Information is used by tax professionals to estimate tax liability of a company and for tax planning purposes.
These professionals are the Sherlock Holmes of the accounting world. They use accounting, auditing and other investigative techniques in cases of litigation or dispute or accounting fraud, which is happening a lot these days. They are the expert witnesses in courts of the law in the matters involving financial fraud or litigations.
Accounting system that is used to keep a track of the financial progress of a project through frequent financial reports. Project accounting is a vital constituent of project management. It is a specialized branch of management accounting. Project accounting can be a source of competitive advantage for project-oriented businesses such as construction firms.
Social Accounting, also known as Corporate Social Responsibility Reporting and Sustainability Accounting, refers to the process of reporting consequences of an organization’s activities on its ecological and social environment. Social Accounting is primarily reported in the form of Environmental Reports accompanying the annual reports of companies. Social Accounting is still in the early stages of development and is considered to be a response to the growing environmental consciousness amongst the public at large.