Some people may think that accounting is all about recording transactions and calculating figures. This is just a tiny part of the use of accounting. In fact, there are many types of accounting, and they serve different purposes. Business owners can choose the types of accounting that their companies would use based on the scope of its operation so that the accounting type chosen can fulfil the needs of the company’s stakeholder. Apart from financial accounting that some business owners would prefer outsourcing to an accounting firm in Johor Bahru, other types of accounting include management accounting, cost accounting, tax accounting, and so on.
In financial accounting, the accountants need to aggregate, compile and generate the company’s financial information. Typically, they will use this information to generate financial statements that the company’s stakeholders would use. The balance sheet (Also see Components in Balance Sheet), income statement, statement of cash flow, as well as the statement of change in equity, are the financial statements of a company that the accountants will generate according to the requirements of applicable accounting framework such as IFRS and GAAP.
Managerial accounting is quite different from financial accounting in a way that it focuses more on the identification, measurement, and interpretation of financial information with a purpose of enabling the managers to pursue the goals of the company. This means that management accounting prioritises the accumulation of information that the company would use for its internal operational reporting. Moreover, the information that this type of accounting (Also see Three Different Types of Accounting) gives is more comprehensive than those provided to external users.
The next type of accounting that we will look at is the cost accounting. The companies may use this method to find out the cost of production (Also see Differences Between Period Costs and Product Costs) that they have incurred by analysing the fixed costs, variable costs, input costs and so on. When using the cost accounting, the management or the department in charge will assess all the costs first before comparing them with the costs the company has actually incurred. By doing so, they will be able to identify any variance or discrepancies. Then, the management can take corrective and preventive measures to remedy the issue.
On the other hand, tax accounting is a type of accounting that is closely related to the issues about taxes. It is related to the company’s compliance with the regulations that are related to tax as well as tax planning, which aims to prepare tax returns. Tax accounting involves the calculation of various taxes like income tax, corporate tax and other taxes. Also, it involves the payment to the tax authorities, which has to be made punctually. In a nutshell, accounting involves the process of collecting various data and records as well as sorting and organising them systematically so that they can be helpful when it comes to decision making. Besides, business (Also see Ways to Boost the Efficiency of Your Business) owners can compare the accounting result of the current year with that of the previous year. This is crucial as they will be able to know the weaknesses of their company and make necessary adjustments to ensure long-term growth and development.