Types of Accounting

As a result of economic, industrial, and technological developments, a number of specialized fields in

accounting have emerged.
The famous branches or types of accounting are:
1. Financial Accounting
Financial accounting involves recording and classifying business transactions, and preparing and
presenting financial statements to be used by internal and external users.
In the preparation of financial statements, strict compliance with generally accepted accounting
principles or GAAP is observed. Financial accounting is primarily concerned in processing historical
data.
2. Managerial Accounting
Managerial or management accounting focuses on providing information for use by internal users, the
management. This branch deals with the needs of the management rather than strict compliance with
generally accepted accounting principles.
Managerial accounting involves financial analysis, budgeting and forecasting, cost analysis, evaluation of
business decisions, and similar areas.
3. Cost Accounting
Sometimes considered as a subset of management accounting, cost accounting refers to the recording,
presentation, and analysis of manufacturing costs. Cost accounting is very useful in manufacturing
businesses since they have the most complicated costing process.
Cost accountants also analyze actual and standard costs to help managers determine future courses of
action regarding the company's operations.
4. Auditing
External auditing refers to the examination of financial statements by an independent party with the
purpose of expressing an opinion as to fairness of presentation and compliance with GAAP. Internal
auditing focuses on evaluating the adequacy of a company's internal control structure by testing
segregation of duties, policies and procedures, degrees of authorization, and other controls
implemented by management.
5. Tax Accounting
Tax accounting helps clients follow rules set by tax authorities. It includes tax planning and preparation
of tax returns. It also involves determination of income tax and other taxes, tax advisory services such as
ways to minimize taxes legally, evaluation of the consequences of tax decisions, and other tax-related
matters.
6. Accounting Systems
Accounting systems involves the development, installation, implementation, and monitoring of
accounting procedures and systems used in the accounting process. It includes the employment of
business forms, accounting personnel direction, and software management.
7. Fiduciary Accounting
Fiduciary accounting involves handling of accounts managed by a person entrusted with the custody and
management of property of or for the benefit of another person. Examples of fiduciary accounting
include trust accounting, receivership, and estate accounting.
8. Forensic Accounting
Forensic accounting involves court and litigation cases, fraud investigation, claims and dispute
resolution, and other areas that involve legal matters. This is one of the popular trends in accounting
today.
Focusing on Specializations
If you want to focus on a specialization, you may want to consider obtaining an accounting certification
in your chosen field. It will give you an edge over those who are uncertified. Due to the increasing
population and demand for competitive professionals, you need to step it up a little to get recognized.
Some of the most famous certifications include the Certified Public Accountant (CPA), Certified
Management Accountant (CMA), Certified Internal Auditor (CIA), Certified Financial Planner (CFP), and
Certified Information Systems Auditor (CISA).

Fund Accounting
Fund accountingis used for nonprofit entities, including governments and not-for-profit corporations. Rather than
seek to make a profit, governments and nonprofits deploy resources to achieve objectives. It is standard practice
to distinguish between a general fund and special purpose funds. The general fund is used for day-to-day
operations, like paying employees or buying supplies. Special funds are established for specific activities, like
building a new wing of a hospital.

Segregating resources this way helps the nonprofit maintain control of its resources and measure its success in
achieving its various missions.

The accounting rules for federal agencies are determined by the Federal Accounting Standards Advisory Board,
while at the state and local level the Governmental Accounting Standards Board (GASB) has authority.




































Management accounting is a field of accounting that analyzes and provides cost
information to the internal management for the purposes of planning, controlling
and decision making.
Management accounting refers to accounting information developed for managers
within an organization. CIMA (Chartered Institute of Management Accountants)
defines Management accounting as Management Accounting is the process of
identification, measurement, accumulation, analysis, preparation, interpretation,
and communication of information that used by management to plan, evaluate, and
control within an entity and to assure appropriate use of an accountability for its
resources. This is the phase of accounting concerned with providing information to
managers for use in planning and controlling operations and in decision making.
Managerial accounting is concerned with providing information to managers i.e.
people inside an organization who direct and control its operations. In contrast,
financial accounting is concerned with providing information to stockholders,
creditors, and others who are outside an organization. Managerial accounting
provides the essential data with which organizations are actually run. Financial
accounting provides the scorecard by which a companys past performance is
judged.
Because it is manager oriented, any study of managerial accounting must be
preceded by some understanding of what managers do, the information managers
need, and the general business environment.
Comparison chart

Financial Accounting Management Accounting
External vs.
Internal
A financial accounting system
produces information that is used
by parties external to the
organization, such as
shareholders, bank and creditors.
A management accounting
system produces information
that is used within an
organization, by managers and
employees.
Segment
reporting
Pertains to the entire
organization or materially
significant business units.
May pertain to smaller
business units or individual
departments, in addition to the
entire organization.
Focus
Financial accounting focuses on
history.
Management accounting
focuses on future & present.
Format
Financial accounts are supposed
to be in accordance with a
specific format, so that financial
accounts of different
No specific format is designed
for management accounting
systems. (Formal and informal

Financial Accounting Management Accounting
organizations can be easily
compared. (Formal
recordkeeping)
recordkeeping)
Planning and
control
Financial accounting helps in
making investment decisions,
and in credit rating.
Management accounting helps
management to record, plan
and control activities to aid
decision-making process.
Information
Quantitative and monetary Quantitative and qualitative;
Monetary and non-monetary
Users
Financial accounting reports are
primarily used by external users,
such as shareholders, bank and
creditors.
Management accounting
reports are exclusively used by
internal users viz. managers
and employees.
Reporting
frequency and
duration
Well-defined - annually, semi-
annually, quarterly. (Verifiable)
As needed - daily, weekly,
monthly.
Optional?
Preparing financial accounting
reports are mandatory especially
for limited companies.
There are no legal
requirements to prepare
reports on management
accounting.
Objectives
The main objectives of financial
accounting are :i) to disclose the
end results of the business, and
ii) to depict the financial
condition of the business on a
particular date.
The main objectives of
Management Accounting are to
help management by providing
information that used by
management to plan, evaluate,
and control.
Legal/rules
Drafted according to GAAP -
General Accepted Accounting
Procedure.
Drafted according to
management suitability.
Accounting
process
Follows a full process of
recording, classifying, and
summmarising for the purpose of
Cost accounts are not
preserved under Management
Accounting. The necessary data

Financial Accounting Management Accounting
analysis and interpretation of the
finnancial information.
from financial statements and
cost ledgers are analyzed.


Financial accounting has its focus on the financial statements which are distributed to stockholders, lenders,
financial analysts, and others outside of the company. Courses in financial accounting cover the generally accepted
accounting principles which must be followed when reporting the results of a corporation's past transactions on
its balance sheet, income statement, statement of cash flows, and statement of changes in stockholders' equity.

Managerial accounting has its focus on providing information within the company so that its management can operate
the company more effectively. Managerial accounting and cost accounting also provide instructions on computing
the cost of products at a manufacturing enterprise. These costs will then be used in the external financial statements.
In addition to cost systems for manufacturers, courses in managerial accounting will include topics such as cost
behavior, break-even point, profit planning, operational budgeting, capital budgeting, relevant costs for decision
making, activity based costing, and standard costing






Usually the terms, Cost accounting and Management accounting, are used interchangeably and are used in
one and the same sense. However, there are differences between these two terms conceptually and in
application.
Cost accounting deals with calculation and measurement of resources utilized for different business activities
usually production and service provision. It relates to calculation of per unit cost using different costing
techniques.
On the other hand Management accounting relates to the use of all such information gathered and
processed by cost accounting by management. Management accounting is about getting the information
from cost accountants and then use it for decision making purposes.
Therefore, cost accounting supports management accounting and in turn management accounting pushes
cost accounting further according to the needs of the management. Because of this strong bondage between
cost accounting and management accounting they are to mean one and the same thing now a days.



Financial Accounting vs. Cost Accounting vs. Management Accounting
Financial Accounting gives out information about the enterprises financial activities and situation. It
makes use of the past or historical data. All the transactions and statements are recorded and presented
in terms of money mostly. Persons who make use of these financial statements are outsiders like banks,
shareholders, creditors, government authorities etc. Financial statements are usually presented once in a
year and there is a certain format for their presentation. It is mandatory for the companies to follow the
rules and policies framed under GAAP (Generally Accepted Accounting Principles). It indicates whether
the company is running in loss or profit.
Cost Accounting helps in the determination of the cost of the product, how to control it and in making
decisions. It makes use of both past and present data for ascertainment of product cost. There is no
specific format for the preparation of cost accounting statements. It is used by the internal management of
the company and usually the cost accountant prepares this to ascertain the cost of a particular product
taking into account the cost of materials, labor and different overheads. No certain periodicity is needed
for the preparation of these statements and they are needed as and when required by the management.
This makes use of certain rules and regulations while computing the cost of different products in different
industries.
Unlike the above two accounting, Management Accounting deals with both quantitative and qualitative
aspects. This involves the preparation of budgets, forecasts to make viable and valuable future decisions
by the management. Many decisions are taken based on the projected figures of the future. There is no
question of rules and regulations to be followed while preparing these statements but the management
can set their own principles. Like cost accounting, in management accounting also there is no specific
time span for its statement and report preparation. It makes use of both cost and financial statements as
well to analyze the data