In this article, we will explain each of the most important types of accounting. Additionally, we will try to answer the most common questions: “How many types of accounting exist? What different types of accounting function in a company? “
- Financial accounting
- Fiscal accounting
- Management accounting
- Cost accounting
- Administrative accounting
- Activity accounting
- Service accounting
- Public accounting
Types of accounting: Financial Accounting
This type of accounting arises from the need to present financial statements to third parties, such as investors, shareholders, or public bodies. There is also a need for the information presented to be homogeneous and standardized. Therefore, this type of accounting focuses on the preparation of accounting statements for third parties and not so much for business management. Nowadays, with the facilities provided by new computer systems, information for decision making and for third parties are obtained courtesy of a unique and integrated accounting system.
Types of accounting: Fiscal Accounting
Fiscal accounting is a type of accounting that is based on the fiscal criteria established by the laws of each country. These define how fiscal accounting should be performed. Obviously, tax accounting is of great importance for accountants and entrepreneurs since this type regulates how records and reports are prepared and dictates the amount of taxes that must be paid.
It is vital to note that there are huge differences between accounting principles and financial laws. Financial accounting may not bare any resemblance to tax accounting; however, this should not be an impediment when managing the two types of accounting simultaneously.
Types of accounting: Management accounting
Management accounting or management (internal) is the type of accounting that exists in contrast to financial accounting (external). In Robert Kaplan’s research, management accounting was created at the beginning of the 19th century as a type of accounting that resulted from the growing complexity of organizations and companies. At the beginning of the 20th century, this practice was first integrated into businesses worldwide. Opposite to financial accounting, which focuses on preparing financial data for external use, management accounting exists to expedite the business’s internal needs.
Types of accounting: Cost accounting
The accounting of costs is related to the type of accounting that is responsible for classifying and collecting information on the current costs generated by a company. Cost accounting focuses on treatment design and cost management. Cost accounting can be concentrated by departments, activities, regions, or products.
In the same way, cost accounting deals with managing expected and desired future costs. Cost accounting follows behavior patterns, activities, and processes in which costs are related to products and their categories.
Types of accounting: Administrative Accounting
Administrative accounting is the type of accounting that adapts to the needs of each of the administrative levels. It refers to the fund and form of the internal reports that the company accountant has created. This type of accounting focuses on the company’s internal aspects, and the information collected should be secured. The financial accounting reports are also used by management and the company owners to evaluate the strategies implemented by the company and their results. In this way, the past, present, and future of the company can be compared.
Types of accounting: Accounting by activities
Activity-based accounting is the type of accounting that links administrative accounting and cost accounting. Accounting based on activities is responsible for studying and classifying the accounts of each of an organization’s operations with the aim of improving productivity.
Types of accounting: Accounting of service organizations
Accounting for service organizations is a type of accounting that specializes in companies or organizations providing services instead of tangible assets. The most common cases that utilize this type of accounting are transport companies, banks, hotels, law firms, consultancies, hospitals, and schools.
Types of accounting: Public Accounting
Public accounting is the type of accounting that deals with the development of information and the control of the processes of public administration activities. Simply put, public accounting manages the expenses and tax collections of all state agencies. This refers to the type of accounting information system used in the public sector within accounting types. It is a slight variant of traditional financial accounting that is used in the private sector. The need for a separate accounting system for the public sector is created by the differences between a company’s objectives and the government.
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.