In small business, accounting refers to a set of tasks that revolve around maintaining a general ledger – your books — and preparing financial statements. Beyond small business accounting, there are many more aspects to accounting. In this article, we’ve prepared a glossary of accounting terms so you can discover the larger world of accounting.
Cost accounting. This type of accounting looks at the cost of items for sale. It’s especially useful in manufacturing, construction, or even restaurants where dozens or even hundreds of components are purchased and assembled to make the items that are for sale. Cost accountants account for and evaluate these costs to determine when they are too high or low and need to be repriced or purchased in a different way.
Cost accounting can be applied to small businesses to help them with pricing, determining breakeven points, controlling costs, and budgeting.
Government accounting. Government accounting is simply accounting that’s done for government entities. Government accountants are concerned with maintaining government regulations as well as learning a different way of keeping books.
Nonprofit accounting. Nonprofit accounting is unique to nonprofit organizations in that they often need to track and mark specific donations, manage grants and meet reporting requirements, fulfill public disclosures and reporting, and maintain a fund accounting process.
Financial accounting. Financial accounting is the preparation of financial reports for external use and includes providing financial statements.
Attest. Attest accounting is where a CPA goes through a process of verifying financial reports of a business to interested third-parties, such as banks and the public. The three main services in this area include compilations, reviews, and audits. Only a CPA can perform these services.
Fraud or forensic accounting. A specialty role in accounting, forensic accountants can help a company that has been the victim of fraud. There are also services available to help reduce the possibility of fraud.
Tax accounting. Tax accounting can be many things: the preparation of federal and state income tax returns for businesses, individuals, and other entities like estates and trusts; state and local tax assistance with collection, filing, remittance, and compliance; franchise tax support; and payroll tax collection, filing, and payment. There are more, but these are the big ones.
Budgeting. Making a revenue and spending plan is an important accounting function.
Internal auditing. Large companies have internal audit departments that maintain checks and balances for the company. In small companies, having someone in charge of monitoring internal controls would be the equivalent function.
Accounting systems. Some accountants are technology-savvy, and this type of accountant can help solve technology issues, integrate accounting system modules, and streamline workflow.
Fiduciary accounting. A fiduciary is someone legally responsible for financial responsibilities in an organization. Fiduciary accounting typically refers to accounting for trusts, but can have a much broader meaning.
Public accounting. Public accounting is practiced by employees in a public accounting firm, which is one that serves many businesses with varying accounting needs. This is opposed to private or industry accounting where an accountant goes to work for one company in their accounting department. Public vs. industry accounting is really referring to an accountant’s career experience.
Managerial accounting. This type of accounting focuses on internal numbers and how the organization can reach its goals. It’s broader than cost accounting, but there is an overlap. Accountants who serve in an advisory capacity to businesses will focus on this area.
Did we get all of the terms you might be wondering about? If not, ask us, and we’ll add it here.