Types of Accounting – The Classifications of the Trade

Specializations in the field of accounting provide various opportunities for growth. Accountants may audit taxes, analyze financial reports and corporate strategies, give financial advice, or concentrate on individual and organizational bookkeeping.

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Types of Accounting - A General Overview

Public accounting is one of the four major types of accounting under U.S. Department of Labor standards. These primarily certified public accountants, prepare financial statements and offer tax advice to clients. Their opinion may also be sought in business decisions and deals, as well as insurance and corporate benefits. Some companies prefer to hire management accountants, who conduct cost accounting, financial analysis and bookkeeping of financial records. Also known as corporate accountants, these professionals may also supervise the company’s budget. Like management accounting, government accounting also involves maintaining financial records, but the sort owned by government agencies instead of private businesses. Among the types of accounting, internal auditing is the kind that has been facing increased scrutiny despite growth because of the financial scandals that have happened in recent history.

Governmental Accounting - Characteristics

The government and the public sectors make use of governmental accounting systems, which are different from private accounting. Governments and public sector entities have different goals, while the private companies exist mainly to gain profit. Moreover, the private sector is not mandated to limit its budget while the government has to practice fiscal responsibility. Governmental accounting measures the flow of financial resources instead of the flow of economic resources. It defines revenue as monetary resources that can be used to pay off debt and other liabilities. In this accounting system, expense is defined as a drain on resources for the current accounting period.

National Income Accounting - Approaches

Measurement of gross domestic product, gross national product, and other indicators of national output or income is called national income accounting. Calculating gross domestic product can be done using the expenditure approach, income approach and value-added approach. The first type simply takes the sum of spending on final goods and services to measure GDP. In the income approach, earnings from wages, rent, interest, profit and other factors of production are totaled. Value-added approach, meanwhile, looks at the stages of production before summing up the value added to each level. Most countries use the methodology recommended by the United Nations so that their national statistics can easily be compared with other countries.