Thanks to the industrial and economic developments, accounting has been getting more and more specialised until it is split into many different categories. Among various types of accounting, there are some that the accountants from the accounting firms in Johor Bahru would use frequently, which include financial (Also see Steps of a Financial Statement Audit) accounting, management accounting and tax accounting.
Financial accounting is mainly about the documentation and categorisation of business transactions. It is also related to the preparation of financial statements by using the historical data that the company obtains from the transactions occurred. The financial statements that the accountants need to prepare include the profit and loss statement, balance sheet (Also see Balance Sheet and Consolidated Balance Sheet) , statement of cash flow (Also see What Does Negative Cash Flow Mean?), and so on. They need to generate these financial statements based on the applicable accounting standards.
The purpose of financial accounting is to ensure that the company comply with the rules and regulations it needs to follow. If the company is applying for a loan or seeking investors, financial accounting will help the lenders or the financial institutions to understand the financial condition of the business. When public companies are dealing with their financials using financial accounting, they need to adhere to the rules that the authorities have set.
The second type of accounting that we will discuss here is management accounting. This kind of accounting is very helpful for managers to have a deeper understanding of the business (Also see How to Set Up an Excellent Business Website?) operations of the company. Management accounting aims to provide the management team with the information they need for decision making.
Management accounting focuses more on generating cash flow (Also see Why Do We Need Cash Flow Statement?) projections, budgets, product costings and others. It also involves financial analysis, cost analysis, forecasting, as well as the review of past business decisions. Cost accounting falls under the category of financial accounting too. Although the accountants do not need to follow the accounting standards like IFRS or GAAP strictly when using management accounting, they still need to comply with the standard accounting practices.
Tax accounting, on the other hand, is related to the preparation and planning for tax season. This type of accounting demands companies to adhere to the regulations that the authorities have established when recording and reporting business transactions. Small business owners can consider hiring tax accountants to make sure that the accounting records comply with the applicable rules.
Tax accounting aims to help business owners calculate the exact amount of income tax and other taxes they need to pay. This type of accounting helps them to find out the ways they can legally cut down the sum of taxes payable. Besides, it helps in analysing business decisions and any other issues that are related to taxes as well.
In short, there are several types of accounting that are specified in treating different parts of the financials of a business. Business owners should ask for professional assistance if they are unable to deal with the accounting-related tasks so that they have more time to focus on their business.