A Business Owner’s Guide to the Different Types of Accounting

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With the changing corporate structures and economic scenarios around the world, the core functions of accounting and bookkeeping have been constantly evolving. Accounting used to be a mere part of the entrepreneur’s repertoire, but now it has bloomed into a specialised service that’s inseparable from any business. It has diversified into various branches: management, financial, and tax accounting.

If you own a start-up, you may find that working with a tax agent in Rockdale is beneficial for your business. Experienced bookkeepers and accountants can help you record a variety of transactions and manage taxes. Below are the specific types of accounting that you should know as a business owner.

Management Accounting
Also known as managerial accounting, it is the process of organising accounting information. Its goal is to help the top management plan and control the operations and make informed decisions about various business policies. This type of accounting is used by managers in organisations that do not require the creation of financial statements.

Management accounting is essentially meant for internal use, and it includes both financial and non-financial data to assist in the decision-making process. This follows that processes like evaluating business decisions, budgeting, and forecasting are a huge part of it. Management accountants have the qualification to provide business managers with all the valuable guidance they can use.

What You Should Know
In essence, management accounting helps evaluate the profitability of a project or a product. This is for the entrepreneur to decide the project or product’s future. Management accounting also aids in determining the pricing of a new product as well as in identifying upcoming business challenges, break-even points, cost of stock in hand, the pattern of company expenditure, and allocation of capital for asset acquisition.

Accounting professionals know how to acquire all this information and present them to the managers at regular intervals. With the support of graphs and charts, the management can get all the guidance they need in planning for the organisation’s future. Managers are then more informed about the bottlenecks before they transform into bigger problems. This makes it easy to modify business strategies based on the data presented.

Financial Accounting
This is the method of keeping the records of all the business transactions. It also involves the preparation of all the financial statements to be utilised both internally and externally. It’s different from management accounting in the sense that it requires the presentation of financial statements to the external public, not just to the internal.

It is in financial accounting where stakeholders are made to understand the significance of the inferences made from financial reports. Accounting firms specialising in this type of accounting have professionals with in-depth knowledge of the Australian Accounting Standards and Interpretation (AASs). In addition to that, they are knowledgeable about the reporting regulations of the state where the business is operating.

Nowadays, accountants and tax agent in Rockdale use cloud-based accounting software to get insights into the performance of the organisation, visualise its financial well-being, and report all the transactions.

What You Should Know
Financial reporting is done on the most significant elements of an organisation, including the assets, liabilities, expenditure, equity, and revenue. The equity, assets, and liabilities are inserted into the balance sheet while the revenue and expenditure are a part of the income statement. The balance sheet helps in the valuation of the organisation while the income statement is required for tax calculations and covers a fixed financial period.

Another valuable report is the cash flow statement where the inflow and outflow of capital are represented. For the organisation to decide the profit-sharing compensation arrangement with the workers, the information has to be communicated internally. The summaries of these financial statements can be used to compare an organisation’s competitors and understand their weaknesses and strengths.

Tax Accounting
This type of accounting involves the preparation of reports to be submitted to the Australian Taxation Office (ATO). Tax accounting mainly serves to find out ways of reducing the tax burden on the business legally. Tax agents are responsible for filing the taxes on time to avoid any penalties and are well-versed with all the tax regulations.

They know which taxes apply to a business and get them registered. Tax agents can conduct tax accounting efficiently, and their services are invaluable to reducing the impact of tax on the business. To undertake tax planning for your business, don’t hesitate to work with these agents.

What You Should Know
Not all taxes are administered federally. Some of them are meant only for the states. The following are the most common taxes:

  • Income tax for business
  • Fringe benefits tax
  • Capital gains tax
  • Goods and services tax
  • Payroll tax
  • Land tax
  • PAYG withholding
  • PAYG instalments
  • Tax agents keep a tab on all the business tax deductions that you can claim to minimise your taxable income. Be informed that most of your expenses can be claimed in deductions (if they’re directly related to the generation of your measurable income). You also have to submit your business activity statements to the ATO as well.

    This can be done quickly online with the help of a tax agent. Your tax agent can also keep a record of all the transactions related to your business tax and superannuation. These records can be presented as proof to substantiate the deduction claims.

    Main Takeaways

  • Managerial or management accounting involves the preparation of reports for business-related decision-making. It is there for internal management.
  • Financial accounting covers financial reports or entries to be handled on the accounting standards by government-related and international accounting bodies.
  • Tax accounting is all about creating financial reports and entries based on the rules set by relevant government tax authorities.
  • Most entrepreneurs are now more inclined to outsource their accounting and work with a tax agent in Rockdale to enjoy a multitude of advantages that can help their business grow.

    For All Your Taxation Concerns, Turn to FinKonsel
    Here at FinKonsel Accountants and Business Advisors, we provide accounting services to help our clients with financial-related matters while they take care of other aspects of their business. Work with a tax agent in Rockdale to get all of your financial reports in order; work with FinKonsel.