Accounting is an incredibly broad field. It’s also extremely important in the business world. Businesses would go bankrupt or experience financial duress without proper accounting practices. There’s a reason you’ll see companies - large and small - have accountants on their payroll.
Accounting refers to measuring, processing, and communicating financial and non-financial information about businesses, corporations, and individuals. Many people often refer to accounting as the language of business because it provides a quantitative view of an organization’s activities and operations. Accounting has always been prevalent in various forms throughout human history. The double-entry accounting system used today traces its roots to Medieval Europe. Today, the accounting landscape has changed. Various councils and boards exist that provide guidelines for accounting standards, like the Financial Accounting Standards Board in the USA and the Financial Reporting Council in the UK. However, most countries are now adopting the International Financial Reporting Standards.
Types of Accounting
It’s no secret that the accounting field is extremely vast. Various types of accounting exist, including the following:
Cost accounting is a prominent sub-field of accounting that aims to record a business’s total production costs. It’s especially invaluable for manufacturing organizations. Cost accounting helps organizations keep track of fixed and variable costs during every stage of the production process. As a result, cost accountants record and analyze the costs of any project, process, or product.
Recording and analyzing the total production cost is invaluable for businesses for several reasons. Firstly, it helps businesses make strategic decisions. In addition, it also helps them identify inefficiencies within the production post, allowing them to rectify them to lower production costs and improve their margins. Cost accounting covers various production costs, including material, labor, and transportation expenses.
Financial accounting is another sub-field of accounting that focuses on recording, summarizing, and reporting the financial transactions of business operations during a fiscal year. It focuses on compiling financial transactions for external reporting. Financial accountants will often work with business managers to help them make more calculated business decisions that lead to profitability. Financial accounts must have strong attention to detail. They track financial activity in ledgers while also ensuring that internal procedures are followed. Financial accountants also make sure that financial activity appears on relevant financial statements. They generally oversee or participate in general ledger accounting, accounts payables, accounts receivables, payroll management, etc.
Financial accountants have to follow compliance laws. Financial accountants in the United States must abide by the Generally Accepted Accounting Principles (GAAP). Meanwhile, financial accountants overseas must comply with the International Financial Reporting Standards (IFRS).
Managerial accounting is another branch of accounting that concerns documenting, monitoring, and assisting an organization’s financial planning. Managerial accounting focuses on preparing documentation for the business’s management instead of the public. As a result, managerial accountants must maintain confidentiality because they handle sensitive information. Managerial accountants also often work with managers to help them create budgets. These budgets are critical to helping organizations meet their short and long-term goals.
Managerial accounting also focuses on analyzing past performance to predict how the business will operate and perform in the future.
Tax accounting is a critical sub-field of accounting because it helps organizations and individuals alike. Many individuals often find it challenging to pay their taxes properly because the tax system can be intricate and complex. For instance, the progressive tax system changes taxation rates for individuals based on their income. A person’s payable tax amount increases as their income increases. For instance, you might have been paying 15 percent tax when earning $40,000. However, if your income rose to $60,000, you might have to pay 20 percent tax instead.
Likewise, the tax system also has many intricacies that people don’t know. For instance, individuals can often lower their payable tax amount via deductibles and write-offs. Unfortunately, many people often don’t utilize these opportunities and, as a result, pay more tax than they should. Tax accountants help individuals and organizations prevent these problems.
If the taxation system is intricate and challenging for individuals, it’s even more complicated for organizations. Organizations frequently have thousands, if not millions, of financial activities per month. Tax accountants help these organizations sift through their financial records to prepare accurate tax returns. They also help businesses utilize deductibles and write-offs to lower their payable tax amount. In addition, they also help businesses use subsidies and grants to their advantage.
Forensic accounting focuses on investigating the financial records of businesses and individuals. Many people often wrongly conflate forensic accounting with auditing. However, they’re very different. Forensic accounting requires accountants to identify missing information in financial statements and records. Then, they must recreate this information. Forensic accounting’s goal is to gather documentation and account for transactions in financial statements. Forensic accountants often work with legal experts and teams on cases involving fraud, claims, and disputes.
There are two types of auditing that everyone should know about, internal and external auditing. Internal auditing focuses on determining the effectiveness of an organization’s internal accounting processes. Organizations will usually appoint an internal auditor - typically an organization member - to review the employee departmental responsibilities, approval procedures, and management policies. Internal auditing is beneficial for organizations because it helps them gather crucial feedback to make an organization more profitable and efficient. Qualifications for internal auditors usually vary. An accountant must obtain a Certified Internal Auditor qualification to work as an internal auditor for most publicly-listed companies and governmental agencies.
External auditing, on the other hand, significantly differs from internal auditing. Independent and third-party accountants will generally conduct external audits. External auditing is a requirement for publicly-held businesses, giving an objective examination and verifying an organization’s financial statement to investors, creditors, and lenders.
Public accounting is a smaller and less-known accounting sub-field. Generally, public accounting refers to organizations that provide accounting advice to clients on their needs. Public accountants often work in auditing, assist with tax returns, and provide consultation on procedures for technological installations.
Governmental accounting differs from accounting for private organizations. Governmental accountants focus on financial planning for local, state, or federal governments. Their job is also to help the government allocate resources to different departments. For instance, a government accountant working with the State of Florida will devise a financial budget and help them allocate the budget to different departments like Healthcare, Education, etc.
Government accountants have different accounting standards they must follow. These standards are provided by the Governmental Accounting Standards Board (GASB) - focusing on developing consistent accounting processes for local and state governments. Likewise, federal government accountants must follow the guidelines provided by the Federal Accounting Standards Advisory Board (FASAB).
Accounting Information Systems
Accounting information systems is a sub-branch of accounting that has become more prevalent due to technological advancements. It focuses on how companies collect, store, and process accounting and financial records. Most accounting information systems today are built to streamline workflows and, as a result, are often integrated with other departments. For instance, an accounting information system will be connected to the HR department’s hiring process. If HR hires a new employee, the accounting information system will automatically include the new hire’s details into the record for payroll creation.
Accounting Information Systems professionals manage these systems. They also focus on improving existing accounting processes. Their primary responsibilities are to monitor these systems and improve them as required.
The Importance of Accounting in the Corporate World
If you’ve been reading so far, you’ll know that accounting plays a crucial role in the business world. Organizations would struggle to maintain their operations without the proper accounting practices. Here are some reasons accounting is extremely crucial in the business world:
Helps Organizations Create and Stick to a Budget
Organizations are all about profitability. After all, most corporations are profit-making enterprises, except for non-profit organizations. Organizations also have many moving parts because they have employees, equipment, etc. As a result, organizations need to create a budget that helps them control and limit expenditures while enabling them to maximize their profits. However, creating a budget is easier said than done. Businesses typically need various financial records to devise a suitable budget for their short and long-term goals. That’s where accounting comes into the mix. Accountants help organizations devise a budget suitable for them. In addition, they also help organizations develop strategies to reduce overspending for profit maximization.
To Obtain Loans from a Bank
Businesses - large and small - often use loans to finance business activities. Whether a business wants to purchase more inventory or upgrade its equipment, it’ll likely obtain a loan from a bank to ensure its liquidity isn’t threatened. Unfortunately, getting a business loan isn’t easy. An organization’s representatives cannot just stroll into a bank and request a loan. Instead, they have to provide financial documentation that shows the business’s ability to repay the loan. Banks will generally require financial statements from the previous five years. These documents are necessary for determining a business’s current financial situation. They also help the bank learn more about its revenue, liabilities, liquidity, and assets.
It’s often said that knowledge is power. This statement is particularly true in the business world. Businesses, particularly public companies, must make informed decisions that help expand the bottom line. As a result, they’ll often defer to their financial statements to help make more informed decisions. Therefore, businesses need to keep detailed financial records of business activities. Accounting maintains these records and assists businesses with decision-making, helping them reach economically viable decisions.
Provides Information to Stakeholders
Most organizations often have various stakeholders that require financial information. For instance, a privately-owned business’s stakeholders include creditors, debtors, employees, owners, and government authorities. Publicly-traded companies also have investors. It’s a fiduciary duty for a business to provide accurate and up-to-date financial information to its stakeholders. Financial records impact stakeholders’ decisions. For instance, investors will refrain from purchasing a company’s stock if the company isn’t performing well. Likewise, creditors wouldn’t lend money or inventory to an organization that’s on the verge of bankruptcy.
Accounting is also crucial because it helps businesses determine and report their profits. Doing so also gives a business’s management a better understanding of its financial position.
Ace Accounting with Tutorjoint
Accounting is many things, but no one has ever considered it straightforward. If you’re an accounting student, you’ll know the frustration caused by many accounting classes and courses. Accounting students often learn challenging concepts like reconciliation and adjusting entries, variable interest entity assessments, preparing cash flow statements, ensuring balance sheet matches, etc. These concepts can be difficult to master.
If you’re struggling with accounting, you’re not alone. Struggling with accounting doesn’t mean you’re bad at accounting. Instead, it simply means you need some extra help to help you ace it.
Tutorjoint is an online learning platform that helps with accounting concepts. We have numerous tutors to choose from as you try to ace accounting. Our accounting tutors provide online teaching classes at your convenience. In addition, they’re available round-the-clock, meaning you can select class timings that work for you. For instance, early risers might prefer to schedule a tutoring session before school, while others might prefer tutoring later in the evening.
One-On-One Accounting Tutoring Sessions
Whether you’re a high school accounting student or a graduate accounting student, you’ll likely have difficulties with simple or advanced concepts. It’s not uncommon for many accounting students to spend many sleepless nights worrying about their accounting courses. Fortunately, that’s nothing that personalized help and individual attention can’t fix.
Tutorjoint allows you to hire tutors for one-on-one accounting classes. Our tutors will provide you with personalized help to ensure you learn and master challenging accounting concepts. They’ll also work with you to further your understanding of these concepts. In addition, our tutors will find related worksheets and exercises to help you put your knowledge to the test.
Group Accounting Lessons
Some students prefer studying with peers because social interaction helps them. If that’s the case for you, our accounting group lessons are perfect. Group lessons are also an excellent option for multiple friends looking to split tutoring costs between them.
Accounting Homework Help
Homework is never fun. It doesn’t matter whether you’re an elementary school student or a graduate student pursuing your doctorate. You’re unlikely to enjoy homework, and no one can blame you.
It’s not uncommon for students to excel at topics in class as the teacher guides them through them. However, the same topics become increasingly difficult as students come home and try to do them independently. Fortunately for you, our tutors can help you with your homework. Whether you’re working on homework late at night or early on a Sunday morning, you’ll find expert help is always available at Tutor Joint.
Accounting Examination Preparation Assistance
Is there an upcoming accounting exam that has got you stressing out? There’s no reason to worry because help is only a few clicks away. Our expert accounting tutors will ensure you’re well-prepared to handle your exam and ace it with flying colors.
Are You an Accounting Genius? Consider Teaching on Our Platform
Tutorjoint is committed to improving our platform every day for new learners. However, improving an online learning platform is impossible without having the best accounting tutors. As a result, we’re always searching for new accounting wizards to sign up as tutors on our online tutor platform. If you would like to teach accounting concepts online, consider becoming a tutor on Tutorjoint. We have numerous tutoring jobs available. Contact us today to get started.