Accounting Principles

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The Main Branches of Accounting

Accounting Type	Definition
Financial Accounting	Financial accounting is the process of recording, summarising, and keeping reports of a company’s business transactions through the financial statements, which are: the income statement, the balance sheet, the cash flow statement, and the statement of retained earnings.
Management Accounting	Managerial accounting is a practice which is used to identify, measure, analyse, interpret, and communicate financial information back to managers for the pursuit of an organisation’s goals. The main types of managerial accounting functions are product costing and valuation, cash flow analysis, inventory turnover analysis, constraint analysis, financial leverage metrics, accounts receivable management, budgeting, trend analysis and forecasting.
Auditing	Auditing is used within accounting to provide evidence which supports and verifies financial information which is provided by management within the financial statements. This will help a business to look at any errors or fraud before they happen. Auditing evidence may include bank accounts, management accounts, payrolls, bank statements, invoices, and receipts. The main audits which businesses may use include internal audits, external audits, financial statement audits, performance audits, operational audits, information system audits, payroll audits and forensic audits.
Tax Accounting	Tax accounting is a part of accounting which deals with the preparations of tax returns and tax payments. Tax accounting is used by individuals, businesses, corporations as well as governments and others. Tax accounting individually focuses on income, qualifying deductions, donations and investment gain or losses. The four main types of taxes are income tax, payroll tax, capital gains tax and estate tax.
Forensic Accounting	Forensic accounting investigates financial information for potential evidence of crimes. Forensic accountants use accounting, investigation skills and auditing to look at whether an individual or a company have conducted and committed fraud. The main types of forensic accounting include financial theft, security fraud, bankruptcy, defaulting on debt, economic damages, m&a related lawsuits, tax evasions, or fraud and corporation valuation disputes.
Cost Accounting	Cost accounting is a form of managerial accounting which aims to bring together a company’s total cost of production by assessing the variable costs of each step of production which includes products, services and any other activities that involve the company. The different types of costs include direct costs, indirect costs, fixed costs, variable costs, operating costs, opportunity costs, sunk costs and controllable costs.
Fund Accounting	Fund accounting is a system which is used by non- profit entities, to help track amounts of cash assigned to different people, organisations and others and the different purposes and usage of that cash. There are several types of funds within accounting the main ones include equity funds, asset allocation funds, fixed income funds, money market funds, index funds, target date funds, money market funds, commodity funds and environmental, social and governance funds (ESG).
Government Accounting	Government accounting is the recording and management of financial activities of governments at commonwealth, state, and local levels. Government accountants prepare, as well as review financial documentation for the government and its taxpayers. There are different types of governmental funds which include general, special revenue, capital projects, debt service and permanent funds.
Fiduciary Accounting	Fiduciary accounting, also known as court accounting, is a report of activity within a trust, estate, guardianship, or conservatorship during a specific period. FDIC has several fiduciary accounts which include accounts with a power of attorney, decedent estate accounts, brokered deposits and UTMA accounts (uniform transfers to minors’ act) and UGMA accounts (uniform gifts to minors’ act)
Responsibility Accounting	Responsibility accounting is a management that is responsible for all management budgeting and internal accounting of a company. The main objective is to support all the planning, costing and responsibility centres within a company. The cost inputs and revenue outputs information are crucial for responsibility accounting.