|
Accounting is the systematic process of measuring the economic activity of a business to provide useful information to those who make economic decisions. There are quite a few fields of accounting including; Financial Accounting, Managerial Accounting, Auditing, Forensic Accounting and Tax Accounting. To put it quite simply, accounting involves recording financial transactions that are used by both internal entities (CFO, controllers, financial analysts, internal auditors, and others who need figures and data for decision making) as well as external entities (IRS for taxes and auditing). Internal accounting is referred to as Managerial Accounting or Cost Accounting while external accounting is referred to as Financial Accounting. Financial Accounting has to follow Generally Accepted Accounting Principles while Managerial Account does not. Why is this? Well, think about it, when you are recording how much you spend so you can better plan what you will have left do you anticipate anyone will be looking at your figures? No. So if you want to use a different way of accounting that will better help you with your decision making (which is what managerial accounting is involved with, decision making), then go right ahead. Just think managerial/decision making and financial/tax, stocks, reports for publicly traded companies. A few additional types of accounting exist. Accounting information systems are the processes and procedures required to generate accounting information. These include:
1. identifying the information desired by the ultimate user,
2. developing the documents (such as sales invoices) to record the necessary data,
3. assigning responsibilities to specific positions in the firm, and
4. applying computer technology to summarize the recorded data.
Another type of accounting deals with non-business organizations. These organizations do not attempt to earn a profit and have no owners. They exist to fulfill the needs of certain groups of individuals. Non-business organizations include
1. hospitals,
2. colleges and universities,
3. churches,
4. the federal, state, and local governments,
5. many other organizations such as museums, volunteer fire departments, and disaster relief agencies.
With non-business organizations we have a need for all the types of accounting we have just reviewed. For example, a volunteer fire department might need to borrow money to purchase a new fire truck. Its banker would then require financial accounting information to make the lending decision.
Non-business organizations are fundamentally different from profit-oriented firms:
They have no stock holders or owners and they do not attempt to earn a profit. Because of this, the analysis of the financial performance of business and non-business organizations is considerably different. Most colleges and universities offer an entire course devoted to the accounting requirements of non-business organizations.
So it is clear that there are many fields of accounting and that each field has its own need for special expertise and knowledge. |
