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Accounting, Types And Why Accounting Matter

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Written by Ipraiseonline
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Accounting is the records that allowed you to know how your business or organizes is moving, and allowed you to understands it’s financial or communication of financial and non financial, know the information about economic entities such as businesses and corporations. Accounting is also known as an accountant that you put raw financial information into records of all your business transactions, taxes, projections, etc. Accounting helps you to known whether you are making a profit or not, what your cash flow is, what the current value of your company’s assets and liabilities is, which parts of your business are actually making profit.

Types of accounting

Financial accounting

Financial accounting focuses or base on presenting the financial information in the form of general purpose financial records (balance sheet, income statement, etc.) it’s distributed to people outside the company. And these external reports must be prepared with, Generally Accepted Accounting Principles (GAAP)

Managerial accounting

Managerial or management accounting, these types of accounting focuses on providing a company’s management with the data needed to keep the business financially healthy. Some of the data comes from recorded transactions, many of the analyses and reports include estimated and projected amounts based on various assumptions. It doesn’t follow GAAP but follow standard accounting performs at accounting school.

Two important of Managerial accounting

  1. The statements produced by managerial accounting are for internal use only.
  2. They’re generated much more constantly or often on a quarterly or monthly basis.

Tax accounting

This type of category accounting provides recommendations or planned for how to get the most out of the tax return. Not like others accounting, which is regulated by the FASB, but tax accounting is regulated by the Internal Revenue Service (IRS), and Internal Revenue Code (IRC), it is designed to ensure that all current tax rules and regulations are followed by businesses, nonprofit organizations, and individual taxpayer. They work to ensure accuracy when calculating due, lower tax liability, complete tax returns accurately, and file tax forms in a timely manner for their clients. Tax accounting is all about making sure that people don’t pay more tax than are legally required to by the IRS.

Cost accounting              

This is a specialty field that looks closely at the actual cost of doing business and fine in a manufacturing industry, an industry that has a lot of resources and costs to manage. Such as materials, labor, overhead, maintenance, and production costs, ultimately provide management with important information.

Cost accounting involves analyzing all of the costs associated with producing an output (whether it be a physical product or service) in order to make better decisions about pricing, spending and inventory. In addition, cost accounting provender into managerial accounting, because managers use cost accounting reports to make a nice business decisions, and it also provender into financial accounting, because costing data is often required when arranging a balance sheet.

Credit accounting

Credit accounting focuses in analyzing all of a company’s unpaid bills and liabilities and making sure that a company’s cash isn’t constantly tied up in paying for them. Credit accounting is one of the most hard kinds of accounting to do batter, because it usually implicate or associate telling someone something they don’t want to hear (when your accountant telling you that you should limit the way you borrowing.)

Fiduciary accounting

Fiduciary accounting is handled or managed by a person entrusted with the custody and management of property of or for the benefit of others. And they also give relevant financial information to their clients once a year.

Why accounting matter

Accounting helps you plan for growth: It can help you in your business succeed by giving you insights into the overall financial health of your company, offering a precise report of your cash flow, keeping you organized and accurate when filing your taxes.

Accounting is essential for securing a loan: Anyone can successful go through the loan process without an accountant. But hiring an accountant increases the chances of getting the loan and also save time. And is not a big deal having them.

It helps getting investors or sells your business: This makes it important to understand how business accounting works. With the help or knowledge of the accountant, help the investors to decide an assets value, understand a company’s financing sources, calculate profitability, and assess risks enrooted or fixed in a company’s balance sheet.

Accounting keeps you out of jail (or at least saves you from fines): It’s likely your business will face a finance-related crisis that it may not be equipped to survive. It’s usually cost when approved for a line of credit, a bank loan, and investment from venture capitalists or winning a cash-rich contract from a new client. This is how some entrepreneurs get into trouble.

Accounting helps you pay the right amount of taxes: Good accountant register the company for tax. Their extensive knowledge of subject of accounts and taxes can help you to pay the right amount and keep your books up to date and easy to understand.

It helps evaluating the performance of business: Understanding that what is going on in business financially, reflecting the result of operations or performance as well as the financial position of your small business or corporation.

It helps recording and filing financial statements: Keeps good record when dealing with your bank, when returning tax, or creditors and managing your business.

It helps to create budget and future projections: Budget that the company wants or the goal to achieve for a particular period usually comes ones every year.

It ensures statutory compliance: It is mandatory or obligation for all organizations or a company needs to follow their statutory and legal compliance to a law, follow specific rules, and Policies and standards. It is the number one step to control your business and also to raise a capital.

It helps planning and control: Management accounting assists with planning and controlling each department, by providing reports estimate the effects of alternative actions on the company ability to achieve desired goals or make a good result at the end of the year.

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