Different fields of accounting
Accounting as a subject can be divided into a number of areas that are closely intertwined to each other. In this article, we are going to explore each of these areas as well as what they entail and how useful they are in our day to day accounting activities.
Financial accounting is a branch of accounting that involves classifying and recording business transactions as well as presenting and preparing financial statements to be used by both external and internal users. It focuses mainly on the preparation of the five basic financial statements including the statement of changes in equity, statement of financial position, statement of cash flows, statement of comprehensive income and notes to financial statements which are used by banks, creditors, tax authorities and financial institutions to assess the company’s financial status and calculate the amount of taxes owed.
Characteristics of financial accounting
- It is monetary.
- It is mandatory to prepare and disclose financial accounting information
- It is historical in nature
- It is regulated by accounting rules and regulations
- It reports on the performance of the entire organization
- It is more useful to external users
- It aims at presenting a true and fair view of the company’s financial status
- It is subject to auditing
- Classification of items in this branch is normally based on the transaction type
Cost accounting refers to the process of collecting, summarizing, determining, evaluating and analyzing costs to enable various alternative courses of action. It deals with evaluating the cost of products and services offered and calculate the cost by taking into account all the factors that contribute to the production of the output.
Characteristics of cost accounting
- Its reports and systems are not subject to accounting standards and rules
- It is futuristic in nature
- It is both non-monetary and monetary
- It doesn’t necessitate preparation and disclosure of financial information
- It’s more useful to internal users of financial information
- It is not subject to auditing
- Classification is normally on the basis of products, functions, activities and internal planning and control as well as the information needs of a business enterprise
- It is more inclined to estimates of performance rather than a true and fair view of the accounts
Management accounting is the branch of accounting that is normally involved with providing -and financial information that enables managers to better plan for activities.
Characteristics of management accounting
- It is futuristic
- It is model based with a hint of abstraction so as to support generic decision making
- It is computed with reference to the needs of managers
Tax accounting largely deals with matters taxation. It helps clients follow rules that have been put in place by tax authorities. Its main functions include dealing with legal implications and filing and preparing various tax returns
Characteristics of tax accounting
- It is governed by tax laws that dictate the specific rules and regulations that must be complied with
- It requires special training and education
Fiduciary accounting basically refers to the evaluation and management of financial records by a guardian entrusted with prudently taking care and managing property for someone else's benefit. Some of the most common examples of fiduciary accounting include estate accounting, trust accounting, and receivership.
Forensic accounting, otherwise known as legal accounting is the use of accounting in legal matters such as dispute resolution, investigation and litigation support
Kinds of forensic accounting
- Accounts and inventory manipulations
- Matrimonial divorce
Auditing is the process of verifying and examining a company’s financial books in order to establish whether they reflect a true and fair view of the company’s financial status. There are two main dimensions of auditing:
- External auditing which involves the independent examination of a company’s books of accounts by an external organization
- Internal auditing which entails the daily and routine examination of financial books by a company’s employee
Characteristics of auditing
- It is done in compliance with GAAP
- It focuses on evaluating a company’s internal control structure adequacy by testing a number of things including the kind of controls implemented by management, how duties are segregated, degrees of authorization and the company’s policies and procedures
This branch of accounting is mainly concerned with the utilization and allocation of public funds. It ensures all funds released for various purposes are utilized accordingly and that each and every penny is accounted for
As you can see, accounting has a number of interesting activities that an accounting student can choose to specialize in depending on their preference. Whichever your choice, if you are stuck with homework, you can hire us to do your accounting homework for you. Am sure you will be amazed by the kind of quality that we deliver