Accounting is an accounting term that refers to the recording of financial transactions. This includes the preparation and documentation of accounting documents and data for reporting to an authority such as a government agency or a private firm. The term also includes the process of collecting, maintaining, analyzing, communicating, and reporting information regarding the financial performance of a company. Auditors are responsible for detecting any fraudulent activity in the accounting process and for providing assurance to management that the methods used are consistent with the accounting principles recognized by the US GAAP (Generally Accepted Accounting Principles).
Accounting has three general stages of activities: planning, activity, and results of operations or achievement of objectives. The planning stage provides for policies and strategies necessary for the achievement of financial transactions. During this stage, accounting methods are established to comply with the requirements of the relevant laws, regulations, and internal policies. At this point, the company must establish its organizational, policy, and operational framework in order to understand, anticipate, and to implement future financial transactions.
Upon accomplishment of these steps, the next step is to record the financial transactions in the books of accounts. This includes the preparation of the balance sheet, income and other financial statements, and the presentation of those reports in the manner prescribed by the particular laws, regulations, and internal policies. Within the accounting profession, there are several different styles of accountancy: internal accountants, public accountants, and external accountants. Internal accountants are accountants who work within the company, usually at the level of the vice president, or in the human resources department. Public accountants are accountants who work outside the company and are often required to report to an outside independent auditor.
In addition, there are several specializations within accounting: marketing, business mathematics, forensic accounting, internal auditing, management accounting, insurance, business valuation, financial reporting, research accounting, and environmental accounting. A manager is the senior financial officer in a corporation or an organization. A manager is typically not trained in accounting but instead performs managerial duties. He/she may be responsible for approving accounting methods, determining which expenses are allowable, collecting payments and disbursing them, analyzing the business’s financial statements, approving expenditures, planning and operating the accounting department, and ensuring that all financial reports are prepared according to established procedures.
Within an accounting firm, there are also accountants who perform more specialized accounting functions, including government accountants, forensic accountants, or managers of specific departments who determine the validity and scope of the financial reports produced by the firm. Management accountants are responsible for identifying problems, determining causes of problems, preparing solutions, and implementing solutions. Financial reporting accountants prepare financial reports to meet the requirements of law, meet management’s needs, and provide management with accurate and timely financial reports.
Within this broad field of accounting, there are many subspecialties. Among the most common are business transaction accounting, managerial accounting, internal auditing, information assurance, insurance and auditing, financial reporting, tax preparation, information systems, financial data processing, financial analysis, financial reporting, and government accounting. There are other subspecialties within the broader field of accounting including clinical accounting, environmental accounting, project accounting, health care accounting, legal accounting, non-accountancy-related accounting, public accounting, and statistics. Because most businesses conduct much of their accounting work in house, management accountants and other accountants are also referred to as management accountants. In addition, some accountants work as independent contractors and do work for businesses on a contract basis.