The regular accounting your business uses is only the tip of the accounting iceberg. There are multiple specialized accounting fields such as forensic accounting, government accounting and internal auditing. Some accounting disciplines may never play a role in your business, while others, such as tax accounting, are common in the business world.
Bookkeeping vs. Accounting
Bookkeeping and accounting have a lot of overlap, but they're not the same. Bookkeeping focuses on the daily tracking of expenses, income, accounts payable and accounts receivable.
Accounting works at a slightly higher level, double checking the accuracy of accounts, preparing financial statements and advising business owners on financial planning. Accounting requires considerably more training and study than regular bookkeeping.
Two Types of Accounting
There are multiple specialized accounting fields, but you can group them into two types of accounting: the specialties your business will need on a regular basis and the accounting disciplines you'll need occasionally or not at all. Disciplines businesses often need include financial accounting, management accounting, cost accounting and tax accounting.
Internal auditing, merger and acquisition accounting and forensic accounting are specialties you'll only need in certain circumstances. There's also government accounting, which is one of the specialties you won't need at all. Government accountants specialize in the types of accounting information and requirements that apply to governments, not businesses. Fiduciary accounting is only relevant if you manage money for someone else, such as serving as an estate trustee.
Accounting Areas of Specialization
The accounting disciplines that businesses use regularly are:
- Financial accounting. These accountants specialize in preparing financial statements for corporations, such as the balance sheet, income statement and cash flow statement. Financial accounting isn't about the worth of your company but rather providing enough information so investors can evaluate the worth for themselves. The statements have to be accurate and comply with standardized guidelines.
- Tax accountants ensure your business's tax return complies with tax regulations and reaches the appropriate state and federal departments of revenue on time. Tax accountants also recommend strategies for reducing your tax bill. There are several sub-specialized accounting fields in this category.
- Management accounting provides reports for you and your upper management to use. These accountants can alert you that revenues have dropped unexpectedly or that accounts receivable are not being settled fast enough. As these reports are strictly for internal use, they don't have to comply with standardized accounting guidelines.
- Cost accounting plays a big role in manufacturing, where it analyzes and reports on manufacturing costs. It's sometimes considered a subset of management accounting.
Other Accounting Disciplines
Other disciplines, while just as important, don't see as much constant use as, say, tax accountants.
- Internal auditing goes over your control systems to spot fraud and waste or the weak points where they could happen in the future. For example, if a supervisor is supposed to review every purchase order but just rubber stamps them, that opens up an opportunity for fraud. Internal auditors work to spot such vulnerabilities.
- Forensic accountants specialize in reconstructing financial data from incomplete records. For example, if your records are destroyed or your bookkeeper has falsified the ledgers, a forensic accountant can reconstruct the actual financial facts. Hopefully, your business won't need the services of this specialist.
- Merger and acquisition accounting covers the financial records required when your business merges with or takes over another. Government watchdogs may scrutinize these deals for any irregularities, so your accountants and attorneys have to make sure everything is above board.
- Accounting information systems blend expertise in accounting with IT. Specialists in accounting information systems make regular accounting more efficient. That includes bookkeeping, data analysis, data visualization, privacy and security.
- AccountingTools: The Types of Accounting
- Fundera: Bookkeeping vs. Accounting: Differences and When to Use Each One
- Accounting Degree Review: Five Great (and Overlooked) Accounting Niches
- Accounting Coach: Financial Accounting
- AccountingTools: Management Accounting
- Accountingverse: Types of Accounting
- Financial Accounting Standards Board. "About the FASB." Accessed Sept. 3, 2020.
Fraser Sherman has written about every aspect of business: how to start one, how to keep one in the black, the best business structure, the details of financial statements. He's also run a couple of small businesses of his own. He lives in Durham NC with his awesome wife and two wonderful dogs. His website is frasersherman.com