Accounting can also be defined as is the systematic and detailed recording of different financial transactions that are related to a business. Accounting is also the process of summarizing, analyzing and reporting all the recorded financial transactions to different agencies, regulators and tax collection entities. Financial transactions come with financial statements which are used to summarize organization operations, cash flows and financial position for a specific period. Accounting and Bookkeeping both are not same. Accounting is an advanced level of Bookkeeping. If you want to learn more about Bookkeeping
Accounting which is referred to as the “language of business” is used to measure the results of a company’s economic activities. Accounting also conveys the result of a company’s economic activities to diverse users. Some of the users are the creditors, regulators, investors, management and more. It is of paramount importance to know that accounting and financial reporting are used interchangeably by many people.
Type of Accounting
There are two major types of Accounting – Managerial Accounting also known as Cost Accounting and Financial Accounting. Let’s discuss both types of Accounting in more detail and conceptual
This kind of accounting is usually for money lenders, investors and different government agencies. It involves the recording and classification of business financial transactions. We also develop financial reports.
The Major Reports are Income Statement, Balance Sheet, Statement of Cash flow. These Reports are created focusing on accounting standards. These standards are set by international accounting and government-related bodies. These Financial reports are available for both the internal and external users.
There are things to be observed while financial statements are prepared. GAAP and accounting principles that are generally accepted are observed. Financial accounting is related to historical DAT processing.
Perhaps, this is mostly for internal management of a business. Management accounting is mainly focused on the preparation of reports that aid the managerial sector of any business establishment to make decisions. In management accounting, there is no form of standards or external rules to follow. However, there are certain standard methods accounting students are exposed to. Managerial accounting involves different areas such as budgeting, financial analysis, forecasting, evaluation of business decisions, cost analysis, and other related areas.
Management accounting otherwise known as managerial accounting provides vital information to be used by users outside the management. This type of accounting aims at meeting NM g the needs of the management of a company and not strict compliance with accounting principles that are generally accepted.
There many examples of this type of accounting. They include budgets, cash flow projections, variance reports, business acquisition analysis reports, and product costings. Managerial accounting includes different standards statements, like balance sheets, cash flow statements and profit and loss of a company.
Managerial or management accounting are prepared to be easy to understand, meaningful to the managerial board of such establishment to make good business decisions. Small business establishments may do just a cash projection in their managerial head. However, it is good to know they may or may not do this cash projection in their head.
The proposed or new business venture, on the other hand, may do a rough calculation for them to achieve good monetary targets. Large-scale business establishments, like the manufacturers, make good use of management accounting reports. Manufacturers may also work with dedicated staff or external Virtual CFO in every business unit, site or region.