Accounting generally means keeping up with through numbers. There are 3 main types of accounting:

• Financial Accounting
• Managerial Accounting
• Tax Accounting

Each of these types of accounting has it’s use and purpose.

What is Financial Accounting?

The definition of accounting through the AICPA is the art of recording classifying and summarizing in a specific manner in terms of money transactions and events, which are in part at least of financial character, and interpretation or interpreting the result thereof.

The more basic definition, is an information in measurement systems that really does three things they identify, they record, and they communicate information about an organization’s business activity.

So in those three things the identify, the records, and communicates those are very important because identifying is really identifying whether you should record it then if you do need to record it then obviously you record it, and then the last piece is being able to communicate it to the end user.

What is Managerial Accounting?

Managerial accounting, also known as management accounting and cost accounting, is a branch of accounting that involves the creation of reports and other necessary documents that aid a manager in the decision-making processes of running his/her company and taking steps to improve its operations.

Managerial accounting typically consists of various processes involved in the identification, measurement, analysis, interpretation and communication of information that aids the management of a company in its managerial functions.

This is in contrast to financial accounting that typically provides similar information to external parties.

What is Tax Accounting?

Tax accounting concerns using the information derived from financial accounting to comply with Federal and State income, sales, and property tax laws. Tax accounting is basically a series of rules for how to report transactions carried out by a company.

Because tax accounting is so unique from financial and managerial accounting procedure, we will not address it in any detail in this section. Consider taking our Business Entities course to learn more about the tax rules, requirements, and characteristics of various forms of business entity.