Types of Accounting

What are the Different Types of Accounting?

Accountant or bookkeeper is a role needed in almost every organization and every industry. Every company needs someone responsible for the correct calculation of the company’s revenue and financial progress. That means there is a demand for accountants and bookkeepers. So, why do you want to get into accounting?

Is Accounting Right for Me?

Every occupation has characteristics that make it suitable for certain people. In the case of accounting, it is an excellent occupation for those who feel comfortable working with numbers and are organized and detail-oriented. 

If you like working with numbers, becoming an accountant or bookkeeper may be the right career path for you. You will work in an office environment with air conditioning—no manual labor or dirt under your fingernails. You will have a central role in the business. In many companies, there will also be opportunity to move into roles with more responsibility and higher compensation.

What are the Different Types of Accounting?

Accounting is a generic term covering many different bookkeeping and financial reporting areas. Access to different accounting disciplines will allow you to specialize in your role as an accountant or bookkeeper. 

Here is a look at the most common types of accounting you might encounter in your quest to build a career.

Cost Accounting

Cost accounting is primarily used in the manufacturing or production industry. The primary focus of cost accounting is to work with costs associated with the manufacture or production of a good to determine its profitability. 

Example: Company A builds houses. Each house has specific costs that must be assigned during the construction process. Once these costs are allocated and compared to the house’s gross sales price, the cost accountant can determine the house’s profitability. Management would use this information to decide whether building the house is profitable enough or whether adjustments should be made to costs or the sales price. 

Cost accounting can be used as such on a micro level, to look at each product or service. It can also be applied on a macro level to the overall company’s performance or to look at the overall industry or economic trends. 

Financial Accounting

Financial accounting focuses less on detailed transactions and more on financial results. A financial accountant’s primary responsibilities include preparing basic financial statements (balance sheet, income statement, owner’s equity, etc.) and analyzing those reports. The analysis function offers a company’s ownership/management a snapshot of variances and ratios of the business’s financial performance.

Forensic Accounting

Some accountants are educated and trained to use accounting to help with investigations. A forensic accountant’s job is to audit, analyze, and investigate financial information to determine whether a financial crime has been committed. It’s common for forensic accountants to be hired by banks, insurance agencies, investment firms, civil courts, and government agencies like the FBI and IRS. 

Managerial Accounting

While managerial and financial accounting are similar, there is a subtle difference between the two. Financial accountants spend most of their time preparing and analyzing financial statements. Managerial accountants will use the same information to work with management and make business decisions related to the future of the business.

Financial accountants deal with the past and present, whereas managerial accountants deal with the economic future. For example, managerial accounting might help executives to determine if a deal to merge with another business will be profitable.

Fiduciary Accounting

When someone sets up a trust or estate entity, they are doing so for tax reasons and the protection of assets. Since transactions coming out of such entities could have significant tax and inheritance ramifications, someone must look after the entity’s financial status. That responsibility will fall on a fiduciary accountant hired by a court, law firm, or the trust/estate itself. 

Tax Accounting

Every person and legal organization is responsible for paying taxes to the IRS based on the U.S. tax code. Tax accountants are usually involved in the tax payment process on two levels. First, they ensure that monthly, quarterly, and annual taxes are paid as required by law. That could include sales taxes, payroll taxes, excise taxes, property taxes, and, of course, income taxes. 

Second, they are often required to record tax-related adjusting entries and prepare tax returns based on financial information provided by taxpayers. 

Governmental Accounting

Governmental accounting is the same as financial accounting with one key difference: government accounting is explicitly done for a government agency (city, country, state, and federal), while financial accounting is done for companies and individuals.

A governmental accountant is charged with the recording and reporting of transactions that involve the use of public funds, which usually come from paid taxes. A governmental accountant might have responsibilities like auditing expenditures for appropriateness and managing public funds. 

International Accounting

Every country has different laws regarding how businesses legally operate and report. If a U.S. company has operations in other countries, it would be prudent for them to hire at least one international accountant. International accountants have an understanding of the business accounting, reporting, and tax laws that are in place in the other countries of interest. That would include an understanding of International Financial Reporting Standards (IFRS) standards that are similar to the GAAP standards used in the U.S. 

Auditing

Auditing is a type of accounting that focuses mainly on the viability and reliability of financial information. Auditors will use ratio and variance analysis to determine whether financial information should be deemed reasonable. Note the term reasonable. Auditors don’t audit for complete accuracy. Instead, they only audit to confirm that the financial information being presented to banks or the public is reasonable based on “Generally Accepted Accounting Principles (GAAP).”

How Do You Become an Accountant?

Because accounting is complex, most companies look for some form of accounting education from an applicant. That is where Interactive College of Technology comes in. We offer an accounting diploma and an associate degree program to prepare you for an accounting role. With industry-experienced instructors and small class sizes, you get personal attention and can ask questions when needed. We also offer career services support to help you prepare your resume, get ready for interviews, and find a job you are passionate about.

What Do You Learn During Accounting Diploma and Associate Degree Programs?

Accounting Diploma Program

Your initial accounting employment goal may be securing an essential (entry-level) accountant or bookkeeper job. It’s an excellent option for those looking to general accounting practices now and a specialty later in their career. Our accounting diploma programs offer you hands-on training in the following areas: 

• Generally Accepted Accounting Principles (GAAP)
• Office Automation and Professional Business Applications
• Professional Accounting Software programs – Sage Accounting & QuickBooks Pro
• Microsoft Office Certification Training

With this education level, you would be prepared to work as an entry-level accountant or bookkeeper.

Accounting Associate Degree

 If you have already decided on a particular accounting interest, we recommend securing an associate degree in accounting. You will have to take required general classes. During the associate degree program, you would get further hands-on training in the following areas: 

• Cost Accounting
• Federal Tax Procedures
• Principles of Entrepreneurship

 

Both the diploma and the Associate of Science Degree will include a 135-hour externship where students can get real world experience in the field.

Want to Learn More?

Ready to start working in an entry-level role as a bookkeeper or accounting specialist? At Interactive College of Technology (ICT), our Accounting & Professional Business Applications program will teach you the fundamentals of accounts payable/receivable, payroll, general ledgers, reporting/data entry, and office automation. You will be prepared to support any size organization and make a difference in your accounting department. 

Let’s take the first step together! Contact us now to learn more.

• Accounting and Professional Business Applications
  • Types of Accounting
    • Difference Between Cost Accounting and Financial Accounting
    • What Does a Reconciliation Clerk Do
    • What Does a Bookkeeper Do
  • Accounting Degree or Diploma
  • Fundamentals of Accounting