Accounting is a very familiar term with all the business people and in companies. Accounting is an integral part of a business for its smooth running and success. Most of the companies have their own accountants. We will see what does an accounting mean and what are the different types of accounting.
What is accounting?
Accounting is referred to the process of recording all the financial transactions happening in a company. All the financial transactions are collected, sorted and stored in order to use the data for future analysis and at the time of taxation, it will be helpful if everything is recorded clearly on a daily basis to avoid mess.
The collection and storing of financial records on the daily basis is referred to as bookkeeping. Bookkeeping is the crucial part as the stored data during the bookkeeping is needed later. And it should be done without any irregularities.
What are the different types of Accounting?
Accounting is mainly categorized into 5. They are
- Public accounting
- Government accounting
- Management accounting
- Financial Accounting
- Tax Accounting
Public accounting firms offer accounting services to various type of clients like business that offer services, manufacturers, nonprofit organizations, governmental organizations, individuals etc. This is the foremost comprehensive sort of accounting, and therefore the accountants concentrate on account management services, bookkeeping, and financial analyzing. The accountants are liable for preparation of taxes, creating accounting designs, identification of monetary errors, and compensating employees.
Governmental Accounting Standards Board governs all the governmental accounting activities. All the funds are separately tracked to provide a report to show the expense and remaining funds. This method of tracking is important so as to accurately report how each fund is spent and the way public money is being used. For example, if a county is doing a road improvement project, they might keep track of all income and expenses associated with that project as a capital projects fund.
Management accounting is meant to support management with the knowledge necessary to form high-level decisions for the business. Management accounting information is shared only with the ones in a corporation. However, when comparing managerial and financial accounting, the latter is meant to tell shareholders and investors about how well a business is performing for a specified time period. In addition, management accounting is forward-looking, devising ways to work more efficiently while providing management with the efficient tools and resources to make sound policies and procedures. 3 types of management accounting used are:
- Performance management
- Strategic management
- Risk management
These management accounting can be used separately and together depending on the situation.
Financial accounting is used to track, record and make report of financial transactions by generating reports. Financial accounting must meet the standard guideline provided by their Government standards in order to maintain the consistency by all the Accounting Firms in Dubai. Financial accounting purpose is to analyse the past accounting data and not to look ahead like management accounting. Two types of financial accounting is there, they are:
- Cash Accounting
- Accrual Accounting
To maintain the accuracy of financial recording both method use double-entry accounting. Usually, small business use cash accounting and large businesses use accrual accounting.
Tax accounting is regulated by the revenue department. Tax accounting is designed to ensure that all the tax rules are followed by all the taxpayers -businesses, nonprofit organizations, and individuals. Tax accountants work with financial statements data to ensure accuracy when calculating and preparing the report for the tax liabilities for their clients. Tax accounting requires accountants to be updated and should have fair knowledge about the various tax laws that change every year.
Tax accounting should accurately calculate tax due, tax liability, tax returns correctly and file tax on time. This is mandatory for individuals, businesses, government entities, and nonprofits organizations. Additionally tax accounting is used to do tax planning so that the businesses and enterprises can plan a tax strategy to minimize their tax dues.
Accounting services are inevitable for both small and large businesses. Accounting services help to stay businesses on target regarding various payments, financial statements, bookkeeping, business expenses, etc. Accounting professionals provide advice to small starting businesses on the proper investment and best structure for his or her business to make sure financial stability. It’s thus crucial for a business owner to understand the best Accounting Companies in Dubai for their outsourcing accounting services for his or her business.