Different Types of Accounting Services
You’ve just started a new business, which is fantastic! However, even if your firm is just getting started, you should be aware of the many types of accounting services accessible. Knowing each of them will prepare you for what is to come and how to manage the circumstances.
Accountants, contrary to popular opinion, do more than only write books or prepare taxes. There are many types of accountants who can also investigate white-collar crimes, audit firms, or work also in the government and manufacturing sectors.
Knowing how to identify the following will be a big benefit to your company since you will surely require a few pairs of hands for your firm to function smoothly. We’ve provided an in-depth list of the various types of accounting, however, if you’re still confused, you can reach out to a specialist for more information.
1. Financial Accounting
Financial accounting’s primary goal is to track, document, and ultimately report on financial activities through creating financial statements.
This must be done in accordance with the standardized criteria established by Generally Accepted Accounting Principles (GAAP) laws. The Financial Accounting Standards Board (FASB) establishes these standards in order to encourage uniformity in the reporting process, so Company A will utilize the same reporting technique as Company B.
Financial accounting, unlike management accounting, is constantly concerned with previous performance and does not look ahead.
Financial accounting, on the other hand, gives an accurate picture of a company’s performance over a certain time period in the form of financial statements. Outside stakeholders, such as investors and financial institutions, are given the completed financial statements.
Financial accounting is classified into two types: cash accounting and accrual accounting. To correctly record financial transactions, both approaches employ a double-entry system of accounting.
While extremely small firms typically utilize cash accounting, all bigger enterprises and publicly listed companies must use accrual accounting.
2. Governmental Accounting
Governmental accounting, unlike financial accounting, is controlled by the Governmental Accounting Requirements Board (GASB), which, like GAAP, has created monitoring and reporting standards for all levels of government.
The primary distinction between financial accounting and governmental accounting is that governmental bodies maintain track of revenue and spending in separate funds.
For example, if a county launches a road construction project, all revenue and costs linked to that project would be recorded in a capital projects fund.
This type of accounting system of tracking is required in order to correctly report on how each fund or program is operating and how public funds are spent.
In most situations, the following government funds are used:
- General fund
- Permanent fund
- Special revenue fund
- Capital projects fund
- Debt services fund
Each fund must be tracked independently in order to produce a comprehensive report on how money is spent and account for any leftover funds.
3. Forensic Accounting
Forensic accounting is a distinct blend of accounting, auditing, and investigation procedures.
It is used to probe both people’ and corporations’ financial operations. It is commonly used by banks, police agencies, attorneys, and companies to examine financial transactions and then present the results in a full report.
Forensic accountants are commonly employed in fraud and embezzlement investigations to gather and prepare data, analyze data, and report on findings.
In addition, forensic accountants may be relied upon to assist in the recreation or reconstruction of financial data, and they are regularly called upon to testify in court to explain their conclusions.
4. Management Accounting
Management accounting is a type of accounting that is utilized in organizations all around the world. Management accounting is intended to give management the information they need to make high-level company decisions.
The relevant information is only shared with individuals in an organization. When comparing management and financial accounting, the latter is intended to educate shareholders, investors, and financial institutions about a company’s performance over a specific time period.
Furthermore, management accounting is forward-thinking, creating methods to run the company more effectively while giving management the skills and resources necessary to develop good policies and processes.
Management accounting is classified into three types:
- Strategic management
- Performance management
- Risk management
Depending on the circumstances, all three forms of management accounting may be utilized concurrently, or management may opt to use either one or two techniques, depending on the information sought.
6. Cost Accounting
Cost accounting is a specialized subject that examines the true cost of running a company. Internally used, cost accounting is most commonly employed in the manufacturing industry, however, it can also be utilized in the service industry.
Cost accounting examines both fixed and variable expenses incurred by a firm, such as materials, labour, overhead, maintenance, and production costs, and eventually provides management with critical information such as break-even points. Although various costing techniques can be employed, most firms will adopt a conventional costing system that allocates an average cost to product manufacturing.
Here’s an example of how to determine manufacturing expenses using cost accounting:
- Material cost – $60,000
- Labor cost – $32,000
- Depreciation cost – $12,000
- Salaries of Manufacturing personnel – $45,000
- Total Manufacturing Cost – $149,000
*Calculating production costs can assist management in determining a profit point.
Cost accounting is a type of management accounting that focuses on the future and is primarily used to help in decision-making rather than to report previous performance.
Due to the complexity of today’s financial market, many accountants have become specialized and focused on certain specialized domains in accounting. This is why it is essential to become acquainted with the various types of accounting in order to choose the right blend of accounting outsourcing services for your business.
If you’re looking for professional accountants that offer 360-degree accounting services for all your business needs, contact us at CharterCPA now!
At CharterCPA, we offer financial outsourcing services for all types of businesses. You can look over our accounting and bookkeeping services or request a quotation, and a member of our staff will contact you.
Thanks & Regards,
Knowledge Base Team
Your virtual accountant