Accounting is a very familiar term for all business people and companies. Accounting is an integral part of a business for its smooth running and success. Most of the companies have their own accountants, and many companies developed their custom accounting software solutions. We will see what accounting means 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 storage of financial records on a 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

1. Public accounting
2. Government Accounting
3. Management Accounting
4. Financial Accounting
5. Tax Accounting

1. Public accounting

Public accounting firms offer accounting services to various types of clients like businesses 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 analysis. The accountants are liable for the preparation of taxes, creating accounting designs, identification of monetary errors, and compensating employees.

2. Government Accounting

Governmental Accounting Standards Board governs all 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, it might keep track of all income and expenses associated with that project as a capital projects fund.

3. Management Accounting

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

This management accounting can be used separately and together depending on the situation.

4. Financial Accounting

Financial accounting is used to track, record and make reports of financial transactions by generating reports. Financial accounting must meet the standard guideline provided by the Government standards in order to maintain consistency by all the Accounting Firms in Dubai. Financial accounting’s purpose is to analyze past accounting data and not to look ahead like management accounting. Two types of financial accounting are there, they are:

• Cash Accounting
• Accrual Accounting

To maintain the accuracy of financial recording both methods use double-entry accounting. Usually, small business use cash accounting and large businesses use accrual accounting.

5. Tax Accounting

Tax accounting is regulated by the revenue department. Tax accounting is designed to ensure that all the tax rules are followed by all 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 a fair knowledge of 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 nonprofit 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.