Branches of Accounting
The work of an accountant ranges far beyond simply summarizing accounting information but extends to many other areas. When a business wants to understand its financial position, cash flows, and profitability, it typically needs information from a certain branch of accounting.
The main branches of accounting and their descriptions are summarized below.
Auditing is the accountancy profession that is the most significant to the public. Once the management prepared the financial statements, it needs to be evaluated by the auditors to ensure that they do not present a distorted figure.
An external audit is an objective and independent examination of a company’s financial statement which is submitted to the public. The result of the examination is embodied in the Independent Auditor’s Report.
Internal audit is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. Internal auditors perform various routine tasks and may undertake detailed checking of an entity’s accounting, operations, and other procedures.
Bookkeeping is a routine process of recording a company’s financial transactions into an organized account. The data are first entered by the bookkeeper into the accounting records or books of accounts and end when the basic data have been entered and the accuracy of those was already checked. After that process, the accounting already takes over.
The term bookkeeping should not be confused with accounting since bookkeeping is a routine operation while accounting requires the ability to examine a problem using both financial and nonfinancial information.
Cost bookkeeping, costing, or cost accounting is defined as the systematic process that involves the recording of cost data to the books of accounts, and reporting those measurements of goods or services in the aggregate and in detail. It is similar to bookkeeping except that costs are recorded in greater detail in cost accounting. Cost accounting contains a greater deal of data and hence, when summarized, provides more information to the business.
Financial accounting is a specific branch of accounting that involves the process of recording, summarizing, and reporting accounting transactions over time. It is more specific in the recording of business transactions and then preparing reports on financial position and results of operation.
Financial accountants place importance on the use of generally accepted accounting principles. The selection of accounting principles and policies to use in financial accounting depends on the regulatory and reporting requirements of the entity.
It aims at providing information outside of the organization but it can be used as well by internal users.
Financial management is responsible for setting financial objectives, making plans based on those objectives, obtaining the needed finance to materialize the plans, and securing the related resources.
Essentially, the financial accountants’ responsibilities include financial planning, investing, raising money, budgeting, and managing and assessing market risks, credit risks, liquidity risks, and as well as operational risks.
Managerial accounting is the practice of identifying, measuring, analyzing, interpreting, and communicating financial information to managers for the pursuit of an organization’s goals. It varies from financial accounting because the intended purpose of managerial accounting is to assist users internal to the company in making well-informed business decisions.
Taxation is the imposition of compulsory levies on individuals or entities by governments in almost every country of the world. Taxation is used primarily to raise revenue for government expenditures, though it can serve other purposes as well.
Government accounting refers to the process of recording and the management of all financial transactions incurred by the government which includes its income and expenditures. Various governmental accounting systems are used by various public sector entities.