Branches of Accounting
The branches of accountancy, also known as the branches of accounting, include a variety of specialties. Each specialty is designed to cater to different aspects of financial reporting and management. Four of the main branches of accounting include the following:
Financial Accounting
Financial accounting is the branch of accountancy that focuses on the preparation and presentation of financial statements for external users, and it provides information to investors, creditors, and other stakeholders to assess the financial health and performance of an organization. For example, a publicly traded company works with experts in financial accounting to help prepare their year-end balance sheets and profit and loss statements.
This branch of accountancy involves recording and summarizing business transactions, cash flow and income statements, and ensuring a company remains compliant with accounting standards and regulations.
Managerial Accounting
Managerial accounting, also known as management accounting, provides information and analysis to a company’s financial decision makers to aid them with the organization’s financial planning. For example, this field of accountancy involves preparing reports related to budgets, cost analysis, performance measurement, and forecasting. Managerial accountants provide insights to managers and executives to support strategic and operational decisions, such as pricing, product mix, and resource allocation.
Auditing
This branch of accounting involves the examination and evaluation of financial statements and records to ensure their accuracy, completeness, and compliance with applicable laws and regulations. Auditors assess the reliability of financial information, identify control weaknesses, and provide an independent opinion on the fairness of the financial statements. Auditing helps to enhance the credibility and reliability of financial reporting and provides assurance to stakeholders. Professionals working in this capacity may be full-time employees, or in some cases, companies may choose to outsource this function to a reputable CPA firm.
Tax Accounting
This branch of accountancy deals with the preparation and filing of tax returns for individuals and organizations. Tax accountants are responsible for ensuring compliance with tax laws, identifying tax-saving opportunities, and providing advice on tax planning strategies. They analyze financial information to determine tax liabilities, apply relevant tax regulations, and maintain proper tax records. Similar to auditors, tax accountants can work full-time for an organization, or companies can choose to outsource this accounting function to a reliable CPA firm.
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