A Brief Look at the 6 Fields of Accounting

Accounting has a long and storied history, but it’s more than just spending hours over tax returns and crunching numbers. Despite the many different methods and practices, there are six different fields of accounting that govern all of them.

Forensic Accounting

While it’s not as interesting as those forensic specialists who investigated murders on CSI, forensic accounting is an exceedingly popular subset of accounting that, in essence, deals with accounting that will typically become used in a court of law. This doesn’t mean it’s accounting done for the courts, but rather accounting that arises out of litigation such as bankruptcy, divroce settlements, securities fraud, computer forensics, and insolvency. Forensic accounting is typically broken up into four different steps: data collection, data preparation, data analysis, and reporting.


Fund Accounting

While most accountants are concerned with profits, fund accountants prefer, well, funds. Simply put, fund accountants are typically utilized by non-profit organizations to manage their specific accounts and ensure that they are run in accordance with the law. There are numerous types of fund accounting available, from those on the state and federal level (governmental funds, proprietary funds, and fiduciary funds), to the five categories of non-profit funds (current funds - restricted/unrestricted; land, building, and equipment funds; endowment funds; and custodian funds).


Cost Accounting

Cost accounting is essentially the type of accounting used by managers to manage the costs of their business. It arose during the industrial revolution, and features a number of different approaches. These include: standard cost accounting, lean accounting, activity-based costing, resource consumption accounting, throughput accounting, and marginal costing/cost-volume-profit analysis. The principal elements involved in cost include labor, raw materials, and indirect expenses, also known as overhead. A major factor to consider with cost accounting is the difference between “fixed costs” and “variable costs.” Fixed costs refer to the price of individual costs remaining the same over a long period of time, while variable costs refers to prices that change over time due to a variety of reasons, such as depreciation.


Financial Accounting

Financial accounting is for the big wigs! It refers to the field of accountancy devoted toward the preparation of financial for those who make the big decisions: CEOs, stockholders, banks, owners, government agencies, and more. In many cases, the information provided by a financial accountant is for the benefit of those outside a specific organization, and is typically used to serve a variety of ends. These include general knowledge of the financial stability of a company and how cash within the company is being handled, among others. The basis of financial accounting, beyond financial statements, is the equation Assets = Liabilities + Owners’ Equity.

Management Accounting

While financial accounting is designed to look at past accounting information, management accounting is used primarily to help managers make informed decisions about the financial well-being of their companies. According to the American Institute of Certified Public Accountants, management accounting involves three areas: strategic management, performance management, and risk management. There are countless methods and practices of managerial accounting available, with a managerial accountant offering as many different ways to assist managers in the financial future of their business.

Tax Accounting

Everyone has had to deal with compiling and preparing taxes, but no more so than tax accountants. Tax accounting is simply the field of accounting devoted toward the preparation of taxes. The rules and regulations of tax accounting are different than those found in the Generally Accepted Accounting Principles, set by Section 446 of the Internal Revenue Code. Experience with tax accounting is relegated to those who have fairly convoluted tax preparation (freelancers, or businesses), and they often utilize the services of a tax accountant or a company such as H&R Block.

Posted on January 15, 2013 at 9:00 AM