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Basic Overview Of The World Of Accounting

Grade Level Grades 11-12

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The world of accounting is quite large as it involves many moving pieces. Let's dive into the world of accounting and what it can entail.

Accounting Types

First let's go over the ten main types of accounting:

  • Financial Accounting - This process mainly involves compiling reports for external use. Tracking financial activity is the name of the game here as you must be able to abide by the Generally Accepted Accounting Principles set for US businesses.
  • Managerial Accounting - This involves looking over documents and monitoring and assisting in the financial planning of an organization or business. Many nonprofit accounting firms fall into this category.
  • Cost Accounting - These sorts of accountants are responsible for documenting and presenting manufacturing costs. They oversee variable and fixed costs to work with managers to decide on things that will affect the financial forecast of the company. 
  • Auditing - These accountants are trained to look at records, books and receipts to make sure that all expenses are properly accounted for and to find mistakes in the accounting that has been done previously.
  • Tax Accounting - These accountants help businesses to stay compliant when it comes to tax expenditures and write offs. Navigating taxes can be a bit tricky, so these accountants help to make this process much more livable.
  • Accounting Information Systems - Accountants in this field implement new technology to monitor the financial growth or shrinking by implementing this technology.
  • Fiduciary Accounting - This process involves trusting one person to handle financial accounts. They're obligated to serve on behalf of their clients for accounts tied to real estate, trust funds, investments and others.
  • Forensic Accounting - When information is missing or incomplete, these types of accountants are brought in to try and find the missing pieces using technology to comprehensively record transactions in financial statements.
  • Public Accounting - These are accounting firms that provide accounting services to other businesses based on their needs.
  • Government Accounting - This type of accounting must comply with the Government Accounting Standards Board and usually monitor government budgets and allocate funds appropriately.

Documents

One of the most common accounting documents is that of a balance sheet. A balance sheet usually goes over assets, liabilities, and equity of a business. Small business balance sheets are pretty straightforward and help businesses know how much cash they have as well as how much debt they owe. 

Income statements are different from balance sheets in that they usually come in 2 different parts. The first part focuses on revenue, and how much is coming into the business. The second part focuses on expenses that were paid during a specific period of time. 

Cash flow statements help track the capital in and out of the business. These reports are typically broken down into operating activities, investing activities, and financial activities. It depicts the viability of the business and its ability to meet certain obligations when they become due.

Depending on the type of business that you run, there are many other types of documents that can help you to better get a handle on what is being done with money in the business. Most accounting software have template reports that can give helpful information to help managers and supervisors make decisions to help the financial growth of the company. 

As you can see, having proper accounting done is extremely important for any business or organization. If you don't have good oversight of your money, it's very easy for a business to get behind, or expend too quickly which can spell doom for a company that isn't aware of their cash flow. By properly monitoring the money that is coming in and out of your business, you can be better equipped to handle financial downturns, as well as know how to invest your money in safe ways during upswings in business and profit. Knowing where your money is and how it's being used at all times is a critical part to running a company successfully. 

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