Accounting is a set of concepts and techniques that are used to measure and report financial information about an economic unit. In simple words, accounting is the companies report card, i.e. its a useful way of recording companies financial information.
Businesses use their accounting to keep their financial data organized which helps them make sense of their financial data and also keeps them complaint of financial regulations.
Accounting consist of two parts,
Book keeping: Its the process of recording and summarizing financial information. it involves recording of transaction i.e. sales, purchases and expenses which are then summarized and presented in the form of financial statements which shows the overall health of the business.
Analysis: This is where you analyze the recorded data to look on the various aspects such as profit, loss, assets, liability etc.
As a result of economic, industrial, and technological developments, different specialized fields in accounting have emerged.
The famous branches or types of accounting include:
Financial accounting: Financial accounting is the field of accounting concerned with the summary, analysis and reporting of financial transactions related to a business. This involves the preparation of financial statements available for public use.
Managerial accounting: In management accounting or managerial accounting, managers use the provisions of accounting information in order to better inform themselves before they decide matters within their organizations, which aids their management and performance of control functions.
Cost accounting: Cost accounting is a process of recording, analyzing and reporting all of a company's costs (both variable and fixed) related to the production of a product. This is so that a company's management can make better financial decisions, introduce efficiencies and budget accurately.
Auditing: Auditing is defined as the on-site verification activity, such as inspection or examination, of a process or quality system, to ensure compliance to requirements. An audit can apply to an entire organization or might be specific to a function, process, or production step.
Taxation: Taxation is the means by which a government or the taxing authority imposes or levies a tax on its citizens and business entities. From income tax to goods and services tax (GST), taxation applies to all levels
AIS: An accounting information system (AIS) is a structure that a business uses to collect, store, manage, process, retrieve, and report its financial data so it can be used by accountants, consultants, business analysts, managers, chief financial officers (CFOs), auditors, regulators, and tax agencies.
Fiduciary: Fiduciary accounting involves recording the transactions associated with a trust or estate entity, and issuing periodic reports on the status of the entity. This accounting is dealt with on a cash basis, where cash is recorded when received and disbursements and distributions are recorded when paid.
Forensic accounting: Forensic accounting is a combination of accounting and investigative techniques used to discover financial crimes. One of the key functions of forensic accounting is to explain the nature of a financial crime to the courts.
To read more about the basics of accounting click here
Hope this blog gives you an brief idea about what accounting is and different types of accounting. If you like this post do like comment and share. Thankyou, see you in another blog Adiós.