2020-09-02 12:10:55 Accounting & Bookkeeping English Learn about the accounting cycle, and how accountants record transactions using source documents. Use a trial balance to produce financial... https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2020/01/what-is-accounting.jpeg https://quickbooks.intuit.com/ca/resources/finance-accounting/what-is-accounting/ What is Accounting? %%page%% %%sep%% %%sitename%%

What is Accounting and How Many Types are There?

3 min read

As a small business owner, you sometimes have to wear many hats, including the hat of an accountant (whatever that may look like). If you are looking for a rundown on what these responsibilities entail, what professional branches there are, and what online financial tools you can use for small business, read it below.

What is a simple definition of accounting?

Accounting is the process by which financial information is measured, recorded, and communicated. Accountants primarily organize and examine the financial transactions and records of an individual, company, or economic entity.

These topics will help you understand more about accounting and it’s role in small business management: 

 

Types of Accounting

Many branches stem from this profession, but the most common ones include:

  1. Financial accounting: the analyzing and organizing of financial results from business transactions.
  2.  Cost accounting: focuses on the various costs incurred by a business in bringing its products and services to the marketplace.
  3.  Managerial accounting: organizes the cost accounting information to facilitate analysis and decision making by business managers.
  4. Auditing: the examination of the financial statements of a business to ensure proper reflection of generally accepted accounting methods and principles.
  5. Tax accounting: focuses on reflecting the differences between tax law provisions and generally accepted accounting methods and principles used to prepare financial statements.
  6. Public accounting: a business comprised of legally certified individuals that provide professional accounting services to other companies and institutions.
  7. Fiduciary accounting: focuses on financial accounting services for fiduciaries managing trust and estates for beneficiaries of these trust and estates.
  8. Forensic accounting: the investigation of financial records and reports of businesses to determine if illegal activities are occurring.

 

What Do Accountants Do?

An accountant is in control of the financial operations of a small business or corporation.

If you are unfamiliar with this discipline’s jargon, here is a quick rundown on the language of accountants. The most important aspects of their record keeping include:

  • income statements
  • expenses
  • assets
  • liabilities

Such financial statements are required to measure the success of a business, as well as the ongoing management and cost planning of said entities.

There are three principal options accountants in Canada will use to base their financial statements. These are the International Financial Reporting Standards (IFRS), Accounting Standards for Private Enterprises (ASPE), Non-GAAP reporting (for tax purposes). IFRS and ASPE fall under Generally Accepted Accounting Principles (GAAP). Learn more about the difference between IFRS and GAAP here.

CPA Canada is the Chartered Professional Accountants of Canada – a national organization and leading authority across the business spectrum. This highly respected institution works with businesses and governing bodies to regulate this profession throughout the country.

 

Differences Between Accounting and Bookkeeping

The main difference between accountants and bookkeepers is the ability, and training, to make decisions based on financial records. If accounting is considered a verb, bookkeeping would be the noun of this action. Bookkeepers are responsible for the physical act of keeping account records, such as the recording of incoming and outgoing costs of the company.

On the other hand, accountants analyze the financial records and make decisions based on this information. The knowledge of this discipline is cultivated over many years of study and numerous certifications, to understand the current accounting practices, standards, and designations. Accountants, bookkeepers, and small business owners alike can hone their skills with Intuit’s free accounting classes and certification.

Small Business Accounting

Small business owners typically do not have substantial accounting firms at their disposal. Therefore they must take full responsibility for the organization and analysis of their financial records. The most important aspect of accounting for small businesses include the management of cash flow, especially keeping track of the cost of capital and accounts receivable.

Accounting for small businesses can be tricky. However, there are online services that can help you keep track of your finances like a trained professional. QuickBooks Online offers end to end accounting solutions to ensure small businesses have the tools they need to succeed. Try it free today.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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