What are the three most important types of accounting?

Women in Business

What are the three most important types of accounting?

While there are as many as twelve branches of accounting, not all of them will be relevant for you or your business.

Here are the three main types which may be essential for you to be aware of.

Tax accounting

Tax accounting involves ensuring that companies comply with tax regulations when they complete their annual accounts. They can do this through researching, analysing and interpreting tax legislation.

This is a crucial role as it is part of a tax accountant’s job to make sure that tax returns are completed correctly before deadlines. If this process is neglected, fines can quickly amass.

Financial accounting

Financial accounting can be further broken down into two types, cash and accrual accounting. Both types use double-entry accounting to make sure financial transactions are accurately recorded.

When it comes to small business accounting or start-up accounting, many small businesses use cash accounting. On the other hand, it is also a requirement for larger businesses and publicly trading businesses to use accrual accounting.

Some of the main roles of a financial accountant could include report writing as well as examining the financial information of a company, for example, to produce reports for the end of the month and year for senior management.

This is important to businesses as financial accountants can have a strong influence on the financial success of a business by providing recommendations and forecasting. They are also important as part of their role is to make sure the business is following requirements and legislation.

Management accounting

The main purpose of management accounting is to inform decision-making and help to assist with management. Tasks of a management accountant can include assisting an organisation’s financial planning and overseeing a team of accountants.

A management accountant will put together reports for internal stakeholders and have a large impact on creating strategies to increase shareholder value. For this reason, they are a very important type of accountant for businesses.

Accountancy for you

Whichever type of accountancy you need, why not let SQK accountancy help you find your feet? If you’re looking for small business start-up support, sole trader accounting or help with payrolls, we are here for you. Peruse our packages or get in contact with us today!

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