There are three main types of accounting, even though there are 12 different branches. Tax accounting, financial accounting and management accounting are the three main types of accounting.
Tax accounting is essential. Management accounting is helpful to all types of businesses, whereas financial accounting is relevant only to large companies.
Tax Accounting
This type of accounting is based on the regulations set by the tax authorities.
A tax accountant is a good option for small businesses. The accountant is responsible for ensuring that the accounting records comply with tax regulations. Also, who is responsible for transferring the information from the business tax return. For Accountants Near Me, contact Chippendale & Clark.
Financial Accounting
This standard accounting method allows investors and lenders to get a good read on the financial health of a company. If a business is seeking to finance a purchase or new venture, this is the method they should use.
Reporting management income also helps businesses to be transparent.
Many larger businesses employ their own accountants. It is to ensure that they comply with the standard accounting principles. Find out more with Accountants Near Me.
Management Accounting
This section focuses on the generation of financial statements, such as budgets and product costs. Cashflow forecasts and business acquisition analyses are also included.
Standard reports such as balance sheets, profit and loss statements, and cash flow statements are essential. These reports are designed to help managers evaluate past decisions and plan the future.
Cash projections are often the only reports used by small businesses. Manufacturers and larger companies will use more reports.
What are the two accounting methods?
Cash and accrual are the two main accounting methods. Small businesses can choose either method.
Cash Method
Cash accounting is the easiest method. Revenue is recorded when money is received. When money is spent, expenses are recorded.
Calculation Method
In accrual accounting revenue is recorded as soon as it is earned and not when the money arrives. A company can bill a client for a service. Even if a client has not paid, the revenue is recorded.
In accrual accounting expenses are recorded in the same period as revenue. If a house-painter has to purchase paint for a project, both the income from the job and cost of the painting are recorded at the same time. The exact date the paint was bought is not important.
