There are several different types of accounting, but if you’re in business, the two that you are most likely to come across are ‘Financial Accounting’ and “Cost Accounting’. Both of these disciplines are essential, but they have very different approaches and benefits for businesses.
Financial accounting is the most typical type of accounting that individuals and businesses come across. When financial accountants work with individuals they help them to prepare and file returns, reduce their tax burdens and teach good financial management. When financial accountants work with businesses, they use standard rules and processes to perform various functions including:
- Creating end of year financial reports.
- Producing balance sheets and profit / loss reports.
- Providing summaries and details of how the business is performing financially.
- Reporting the financials of the business to executives.
- Reporting the financials of the business to external stakeholders such as stock owners, the IRS, and other government bodies.
Cost accounting is based on analyzing current and future business processes to work out how much those processes are currently costing or will cost in the future. Cost accounting uses specific tools and techniques to analyze business data and provide the following types of information:
- The cost of employing individuals and teams (i.e. payroll and benefits).
- The current or potential costs of projects and programs.
- The amount of money that individual parts of the business are projected to use.
- Recommendations for making the business more cost-effective.
- Understanding the end-to-end cost of providing products and services.
Montachusett Business Services offers both financial and cost accounting through our network of CPA partners. If you’d like to learn more about these services, please fill out the form below: