“The art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof” is how the American Institute of Certified Accountants (AICA) broadly defines accounting. Accounting is a field in which any exact generalization and definition can prove to be very misleading. Most of us think of accounting as something or anything that a Uncle Scrooge-like character does with loads of raw numbers on one side and cold calculating logic on the other side. This is not quite far from truth though many would not like to agree with the Scrooge part. However, everyone would agree that the main aspect of accounting is based on numbers and in squeezing forth meaning from these numbers. For those who have a phobia for numbers and statistics, accounting can prove to be their worst nightmare. For the rest, the enigma of numbers is hard to grasp. Whatever may be the case, accounting facilitates every mode of transactions that ensures the proper running of the economy. Thus, accounting is the force behind economy and finance. It is a field fraught with challenges and risks which makes it all the more exciting. Whether you are keeping track of, whether it is your daily expenditure in a diary or reading the annual report of a company, all constitute accountancy. However, since accountancy is used in a wide range of fields, there are many different types. Each type concentrates on the needs and requirements of that particular field, but is united in the fact that each consists of dealing with every aspect of financial transactions in that field. Read the article below to know the different kinds of accounting.
Different Kinds Of Accounting
This type of accounting deals with the preparation of financial statements for government agencies, banks, stockholders, suppliers etc. The basic aspect of financial accounting is to measure and monitor the performance of the agent and show the results to the users. In this way, the principle-agent problem is minimized. In general, financial accounting involves the preparation of reports of the organization’s financial data for the benefit of those outside the organization.
In an organization, the management must have all the financial information at the tip of their fingers. This task is fulfilled through the department of management accounting. Management accounting facilitates the use of accounting information by the decision makers inside the organization.
Forensic accounting is a specialized branch of accounting, which deals in disputes and litigations. The main task of forensic accounting is to offer expert evidence in the court of law in areas of all financial matters. Thus, the study involves loss and damages, breach of contract, valuation and the like.
Fund accounting is generally used by governments and NGOs. Here profitability is not a concern, rather it is the accountability that matters most. It is a process of accounting, which involves securities, commodities and real estate. The task of fund accounting is to show how fund is spent, not in a single set of accounts, but in more than one fund, and prepare reports detailing the financial activities of all its individual funds.
In this type of accounting, the organization’s economic actions that can have social and environmental repercussions in the society are analyzed and communicated. Various organizations make use of social accounting in the perspective of corporate social responsibility and business. Social accountability emphasizes on corporate accountability by stressing on socially relevant behavior, so that the organization is accountable for social development and performance.
Resource Consumption Accounting
This is used to provide the managers of an organization with all the information to help in decision support. As such, resource consumption accounting brings in optimization of the enterprise. It uses the same approach as management accounting and deals in raising the standard and knowledge by facilitating disciplined practices.
Project accounting is a part of project management, which deals with the tracking of financial progress of projects that can be used by managers.