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Branches of accounting
The types or branches of accounting are as follows:
- Financial accounting – Strict compliance with the generally accepted principles of accounting (GAAP) is observed while recording and classifying the business transactions and preparing the financial statements of a company. It primarily processes historical data in chronological order for external users.
- Managerial accounting – This branch of accounting focuses on preparing data related to the operations of a company which shall be beneficial for the managers in making key decisions. It does not strictly abide by GAAP and is for the internal users.
- Cost accounting – It is similar to managerial accounting and is usually used in the manufacturing industries as they have lots of costs and resources to manage. As the name suggests, it focuses on classifying and recording the production costs (fixed as well as variable costs).
- Auditing – This branch of accounting is of two types, internal and external auditing. Internal auditing comprises how a company functions and distributes the accounting tasks among its employees, on the other hand, external auditing involves an independent third party that analyses a company’s financial statements and ensures that it abides by GAAP.
- Tax accounting – This focuses on the preparation of tax returns and planning. It enables a business in determining the income and other types of taxes, and how to legally minimize the amount of tax owed.
- Accounting Informations System – AIS, includes the management of accounting software, employees, and bookkeeping. It focuses on the monitoring, implementation, application, and observation of accounting systems.
- Forensic accounting – It is a trending branch of accounting. Forensic accounting focuses on the legal affairs of a business such as fraud, disputes, legal charges, claim settlements, etc.
- Fiduciary accounting – It refers to the management of property for a third party or business. The accountants manage the administration of a property. For example, trust accounting, estate accounting, etc.