Branches of Acounting

The accounting system is central to all specialties . Each accounting speciality takes data from that system and makes a special analysis or manipulation of them to produce the information needed for its reports.

Look at cach of the branches of accounting.

I’mancial Accounting our central point in this book will be the study of this branch of accounting. Its primary function is to provide financial information to investors and other users not directly involved in the management of the organization.

The reports from the financial accounting process are general-purpose financial statements. This statements include balance sheet , the income statement and the statement of cash flows . We will see shortly how each of these statements reports different important financial facts and results.

The financial statements are primarily designed for external audiences of which steekholders and creditors are the most important . However they are of interest to practical all audiences.

Managerial Accounting. Management makes decisions about the acquisition and use of recourses within the entity. Management must plan for and control a firm’s activities to accomplish the goals of the organization. Therefore in addition to the information shown on financial statements, management needs specific detailed data to control current operations and plan future operations.

Regulatory accounting Regulatory agencies constantly can on accountants to prepare a variety of special purpose reports. The agencies need these reports to judge whether entities are ineeting theig legal obligations and conforming to various social and economic regulations issued by federal, state, local governments .

Tax accounting This aspect of the accounting process covers the preparation of records and reports necessary for filling up specific tax returns. Most tax reporting begins with basic financial accounting data. Often , however, tax requiments call for different concepts and interpritations of those data.

Tax regulations are a complex set of ever changing laws and rules . Keep up-to date on tax regulations and their implications for business planning and decision making are critical accounting activities.

Types of business organization

The are 3 types of business organization: the sole proprietorship, the partnership and the corporation. The most economic form of business is the sole proprietorship - a business owned and run by one person. The main advantage of the sole proprietorship is that it is easiest form of business to start and run. There is almost no red type. Sole proprietors own all the profit of their enterprises and are free to make whatever changes they please. They have minimal legal restriction and do not have to pay special taxes placed on corporations. The main disadvantage is the unlimited liability that each proprietor faces. If the business fails, the owner must personally assume the debts.

The second kind of business organization is the partnership. A partnership is a business that is jointly owned by 2 or more people, who have combined their talents and resources for the purpose of earning a profit. The most common form of partnership is a general partnership. Partners own the business, work in it and share the profits and losses. They are responsible for the management of the business and usually agree with each other before making any major decisions. Limited partners are only liable for the amount they have invested. The advantage is that it is easy to form and often get tax benefits from the government. Disadvantage is unlimited financial liability.

The last kind of the business is corporation. People, who want to form a corporation must file for permission in the state where the business will have mad quarters. If approved a charter is granted. The charter states a name of the company, address purpose of the business etc. The charter specifies the number of shares or stocks.

The major advantage of the corporation is that it is the ability to acquire great financial resources. Disadvantages are that it’s difficult and expensive to organize a corporation. There is an extra tax on corporation profits. The government taxes corporate income in addition to the taxes paid by shareholders on their dividends.