What is Financial accounting. Types of Accounting.

Importance of Accounting

by Muhammad Ali

What is Financial accounting. History, Importance and Types of Accounting

What is Accounting?

Accounting is the process of keeping record of all the financial transactions within a business. It involves the systematic and concise records of financial activities, including analyzing, summarizing, recording of income & expenses, assets, liabilities, equity. The person who perform all accounting tasks is known as an accountant.

Accounting is a big powerful machine where you put financial data and get financial information.

Overall this demonstrates about your company’s financial health and tells what’s working or what’s not working. Accountancy is like a language that tells the story of your company and helps to communicate to oversight agencies, regulatory, tax authorities etc.

Accounting

History of Accounting

The history of accounting has been started as long as money itself. It can be track back to ancient civilizations in Mesopotamia, Egypt, and Babylon.

Roman Empire government had detailed records of its finances. The Italian Luca Pacioli is considered “The Father of Accounting and Bookkeeping” he was the first person who wrote double-entry book due to his contributions to the development of accounting as a profession.

During the period of the Mauryan Empire, In India, Chanakya wrote a manuscript similar to a financial management book. His book Arthashastra contains some detailed aspects of maintaining account books for a sovereign state.

What is the purpose of Accounting?

Accounting the main and key factor of every business. You must need accounting in any kind of business, whether it’s small business or a large firm and a freelancer you need an accounting to manage your finance. It doesn’t matter if it can be handled by a bookkeeper or an accountant. The reports generated by different sources of accounting, such as cost accounting and managerial accounting, are crucial in informing management about business decisions. 

Types of Accounting

There can be several accounting categories; each category deals with a particular set of information, or describe a specific transaction. In this section, we discuss four most common branches of accounting:

  • Financial Accounting: This is the process of tracking and reporting financial transactions and cash flows. This type of accounting is needed to generate financial reports for the use of external individuals and government agencies. Audits, conducted by external CPA firms, are typically performed annually for most companies, especially publicly-traded ones. Audits are necessary for legal compliance and ensure the accuracy and reliability of financial statements.
  • Managerial Accounting: This is the process which focuses on providing financial information and analysis to company’s internal people to make sound business. Like its name in managerial accounting, an accountant generates monthly or quarterly reports and present them to a company’s management team so that they can use it to make decisions about how the business operates.
  • Cost Accounting: This is the process of tracking, analyzing, and controlling cost factor involved in a business activity. Same like managerial accounting as it helps business to make decisions about management, Cost Accounting is the way to help businesses make decisions about costing. Money is cast as an economic factor in production in cost accounting, whereas money is considered to be a measure of a company’s economic performance in financial accounting. Cost accounting is the most important because it helps you ensure that you are spending money on assets not liabilities (things that benefit your business).
  • Tax Accounting: This is the process of tracking and reporting income and expenses related to your company’s taxes. No one wants to be in a situation where they have to pay more income tax than is normally required by the Internal Revenue Service (IRS). To be partner with a knowledgeable tax accountant can provide business with valuable insights and expert guidance in managing their tax obligations while maximizing their financial resources.
Accounting

Why Accounting Is Important

  • Financial Management
  • Legal and Regulatory Compliance
  • Stakeholder Communication
  • Business Performance Evaluation
  • Decision Making
  • Resource Allocation
  • Business Planning and Forecasting

Ways to Manage Your Business Accounting

We’ve gone through all the types and benefits of accounting. This moves us to the next question of knowing how to implement accounting efficiently in your business. Business accounting can be managed by using different waysThese are;


  1. Outsource to Professionals: You can outsource professional accountant for your business accounting. Using this method, you can get excellent service because professional accounting firms have team of experienced accountants. Outsourcing a professional helps you save time and cost. Such as we 360 Accountants provide you the best and affordable financial accounting services. Your dream for all accounting and finance needs. We offer your wanted accounting and finance all services from Accounting & Bookkeeping to Auditing, Tax Planning, Financial Analysis, and many more.
  2. Accounting Software: You can perform basic tasks using accounting software QuickBooks, Xero etc., such as tracking inventory, invoicing and payments, generating sales and expenses report. It is super budget friendly for small business and freelancers or for those who have a budget issue to hire an accountant or a professional bookkeeper. But still you need a professional like 360accountants.net for your business accounting, in order to achieve your goal.
  3. Hiring an In-House Accountant: You can manage your business by hiring an in-house accountant or CPA (Certified Public Accountants). It can be a good option if you want to ensure your books are in accurate manner. But it does come with some disadvantages. You must consider cost associated with hiring an in-house accountant, it can be a heavy burden on your business’s finances. It is always cheaper to do stuff by yourself than paying someone else, right? Unfortunately, accounting is a complex process, only an experienced professional can do it accurately.
Accounting

You may also like

5 comments

Muqarrab 3 August 2023 - 19:17

Very informative and helpful knowledge.

Reply
Dur e Nayab 3 August 2023 - 19:21

If you’re looking to learn more about financial accounting and its historical context, I highly recommend this blog. incredibly informative and well-researched.

Reply
Shafiq Ameen 3 August 2023 - 19:23

Very Informative

Reply
Ibrar 4 August 2023 - 02:05

A Good effort and informative well done keep ot up

Reply
Muhammad Asim 4 August 2023 - 11:18

Informative

Reply

Leave a Comment