We’ve all heard about accounting, but do you know how many accounting topics there are? Every day, we hear about accounting in recent events, and its impacts on our society. New students are told to be afraid of accounting or to stay away as far as you can, but finding the right subject for you can make accounting your best career path.
If you’ve chosen accounting as a major already, or are in this field currently, congratulations! You are among the brave, diving into the world of valuations, debits, and credits, wondering why the books won’t balance, all because of a missing number. In all seriousness, accounting can be a rewarding career path, as every business or individual needs a form of accounting to check the health of their finances.
According to U.S. News, an accountant ranks 24th out of the top 25 careers in 2019. However, accounting is a broad subject, which is why we have created this article for you. The main purpose is to inform you on various accounting topics, shedding light on this vast subject and career choice. Hopefully, after you’ve read this article, you come away with an accounting topic that interests you for your future endeavors.
Table of Contents
Accounting Information Systems
An accounting information system is a system of collecting, auditing, and processing financial data modules. It involves the process by which a business manages, stores, retrieves, processes, and reports its financial data to individuals. Examples of those interpreting the data are business analysts, consultants, accountants, auditors, CFOs, tax agencies, and regulators.
AIS is an accounting topic that has six components: people, data, procedures and instructions, IT infrastructure, software, and internal controls. As these main components work together, the objective is to provide the highest level of accuracy when reporting financial data to those who need it.
Auditing is the process of analyzing an individual or organization’s financial records to determine validity while abiding by the standards of accounting rules, laws, and regulations. Also, if an entity is subject to verification, on-site processes will be conducted, such as examinations or inspections.
When the IRS (Internal Revenue Service) suspects an entity of falsifying documentation of expenses and income, they are subject to an audit. As a result, consequences will occur if the individual or business is found guilty.
Auditors specialize in finding inconsistencies in both individuals and companies, for data that may appear fraudulent. Commonly, those who do not pay their taxes are subject to an audit if the IRS feels they have not paid their taxes.
Considered the basis of accounting in business, bookkeeping refers to the daily recording of financial transactions. This practice also involves recording sales, payments, purchases, and receipts executed by an individual or corporation. Transactions that are classified and recorded for businesses also fall under bookkeeping practices.
As more and more businesses emerge, bookkeeping is an accounting topic most commonly used by any entity, as it documents day-to-day debits and credits. If you need an entry-level accountant job, businesses offer bookkeeping jobs and internships for beginner students.
Business accounting is systematic analyzing, interpreting, recording, and presenting financial information as a way to keep track of a business’s operation. It involves the analysis of business finances to help the owner make informed and beneficial decisions. Also, business accounting can be conducted by an individual or a team, depending on the size of the organization. Finally, business accounting aims at depicting the financial health of a business.
Cost-benefit analysis (CBA) is the art of determining the costs of implementing a program or the cost-output relationship, based on certain factors. It’s a process done by focusing on analyzing and comparing the expenses incurred in hiring, as well as the corresponding increase in a company’s productivity.
Many variables go into a cost-benefit analysis. It starts with opportunity costs, a concept that results in the expenses and benefits of a business decision. Other types of costs include direct, indirect, and intangible. Potential risks a company takes in a new market or new expenditure are also factors.
Alternatively, the benefits of cost-benefit analysis include intangible benefits, revenue and sales, as well as a gained market share.
Environmental accounting is a crucial tool that supplements ecological management. It’s useful for determining the influence of our natural environment in the society or economy. Also, environmental accounting data serves both public and private organizations through disclosure in reports. Furthermore, the data highlights the advantage of natural resources to economic growth and the costs incurred by resource degradation or pollution.
Fiduciary accounting specializes in estates, ownership of property, and estate rights. For instance, if there was a transfer of a vast estate into another person’s hand, a fiduciary accountant will be a part of this transaction. There can be complications that arise for this type of work, such as transferring wealth from a will after a person passes away.
Also known as financial accountancy, financial accounting is a field of accounting that is concerned with the analysis, reporting, and summary of financial transactions related to a particular business. It’s also defined as the process of preparing financial statements available for public consumption. Because of the data financial accounting provides for decision-making purposes, business owners and stakeholders benefit the most from this type of accounting.
In college, financial accounting will be a foundational course, as the concepts are incredibly essential to your career. This accounting topic will introduce the income statement, balance sheet, and statement of retained earnings.
Financial Statements and Reporting
Financial statements are reports of a company’s financial position, using the income statement, balance sheet, and statement of retained earnings. Because multiple decision-makers use financial statements, the information these reports convey should be easy to understand by presenting it structurally. Financial statements provide a sneak-peak of how a company is doing both quarterly and annually.
In the realm of accounting, financial statements are the most critical aspects of this practice because the data will tell how good a company is, or how poorly it’s performing. When preparing financial statements domestically in the U.S., accountants must abide by the standards of the FASB (Financial Accounting Standards Board). Internationally, financial statements must follow the rules of the IASB (International Accounting Standards Board).
Due to technological advancement, forensic accounting is an interesting accounting topic that is in demand. This field employs auditing, accounting, and investigative skills to analyze a company’s financials. Because of its investigative nature, forensic accounting delivers an analysis that is admissible in court. Forensic accountants are specially trained to investigate numbers and play a significant role in fraud cases. Also, forensic accounting is the specialty branch of accounting that focuses on litigation and disputes.
General accounting deals with maintaining and ensuring the integrity and accuracy of an institution’s financial records. The responsibility of general accounting ensures that all transactions comply with the institution’s accounting system, under the principles of Generally Accepted Accounting Principles (GAAP).
In the United States, GAAP compliance is the standard, while internationally the IFRS (International Financial Reporting Standards) is the global standard. Despite one being local, and the other more worldly, these two entities have similarities. However, the differences are that GAAP is more principles-based, while the IFRS is more rules-based.
GAAP, when compared to the IFRS, has been seen as outdated. In the future, there may be a potential shift for GAAP to merge with IFRS. However, because of differences, it may not happen anytime soon.
Government accounting requires a different framework than other accounting methods, as it relates to managing the funding and expenditures of government entities. A special skill-set is in demand, resulting in accountants staying in this field for the majority of their careers.
International accounting pertains to those overseas who balance financial statements, similarly to the United States. However, different rules apply to the methods they use. For instance, the GAAP is the U.S. standard entities must abide by. As mentioned before, IFRS is the global standard, most commonly overseas.
Today, a standard financial accountant working in a global business environment will fit the requirements to be an international accountant. An individual who is familiar with both GAAP and IFRS will be seen as a specialized accountant in international business.
Laws and Ethics
Laws and ethics are the rules and regulations of legal conduct that concerns matters of greater importance. Consequently, violations of the laws and ethics can bring disturbance to social structures and individual conscience. As a result, violations carry a reduction or loss of possessions and freedom. The law, equipped with penalties, help to discourage people from harming others in society.
Those who major in accounting must enroll in business law courses to understand better the ethical values that come with being an accountant.
Managerial accounting specializes in using and interpreting data to update managers on how well the business is performing while meeting company goals. This accounting topic provides the basics to accounting students who will use these concepts for the rest of their career.
In college, managerial accounting is the first course you will take, and it will be challenging due to the amount of concepts you will learn. For instance, this accounting topic introduces debits, credits, and valuations. However, more intricate parts of accounting will also occur, such as margin analysis, cost analysis, capital budgeting, forecasting, and more.
Small businesses are more likely to adopt the methods of managerial accounting because of its ability to communicate if the business is meeting short-term goals. Alternatively, financial accounting is everything managerial accounting is but with more concepts, as persons outside the company must interpret the financial statements.
Personal Financial Planning
Personal financial planning is a long-term process that helps to manage individuals finances and help them achieve their goals. Also, it will help to negotiate some financial barriers that will inevitably rise in different stages of life. Using your financial resources carefully, while taking the time to learn about money matters, will allow individuals to reap the benefits in the future.
Public accounting is the process of providing services to various clients that include government agencies, educational institutions, business entities and individual taxpayers. Also, it allows firms to provide services to clients such as service companies, manufacturers, retailers, and nonprofits. In addition, public accounting is a business service that offers services like auditing, tax services, and expertise.
A Certified Public Accountant, or CPA, is a popular occupation. Being a CPA is vastly in demand, and as mentioned before an accountant is a top career choice today. Some universities offer a five-year program to complete both a bachelor’s and a master’s in accounting, which will prepare students to take the CPA exam and fulfill the requirements for a CPA license.
Sports accounting is the act of being an accountant for individual athletes or a major sports team. The profession has become one of the highest paying jobs in accounting due to the popularity of sports. The role of a sports accountant is to take responsibility for controlling and recording the club’s expenses and income. Also, other activities include negotiating terms with a player’s agents or sponsors.
Tax accounting is a combination of accounting methods that focuses on tax. The sole purpose of tax accounting is to accurately calculate the tax owed by an entity. The Internal Revenue Service governs and dictates all the specific rules that must be followed by individuals and companies when preparing their tax returns.
There are many parts to tax accounting, starting with income. Every year, millions of businesses and people must file their taxes, reporting to the IRS what they owe, and deductions, if any. No one is safe from the IRS, as tax rules apply to every party, including businesses, individuals, and corporations.
Tax accounting serves both individuals and businesses. However, both have different requirements for the IRS. For instance, an individual and a business do have to report their income, but expenses are different. Individuals tend to report their investment gains and losses, while businesses report outgoing expenditures and funds.