The three main categories of accounting, which essentially define the scope and audience of financial data, are Financial Accounting Services Buffalo, Managerial Accounting, and Tax Accounting. While there are many sub-specialties, these three branches represent the core functions within any major business or organization.
Purpose: To provide a clear picture of a company's overall financial health and performance to external stakeholders (people outside the company).
Audience: Investors, creditors, government regulators (like the SEC), and the general public.
Focus: It is primarily historical, summarizing past transactions and performance over a specific period (quarterly or annually).
Regulation: Must strictly follow a set of standardized rules, such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), to ensure consistency and comparability across different companies.
Output: The primary output is the set of financial statements: the Balance Sheet, Income Statement, and Statement of Cash Flows.
Purpose: To provide detailed, relevant, and timely information to internal stakeholders (management and employees) to help them make operational decisions, plan, and control costs.
Audience: Company executives, department managers, and internal teams.
Focus: It is heavily future-oriented, involving budgeting, forecasting, and "what-if" analysis. It also looks at the past to evaluate internal performance.
Regulation: It is not bound by GAAP or IFRS. Reports can be highly customized and tailored to specific managerial needs, focusing on operational metrics rather than external compliance.
Output: Internal reports, including budgets, cost analyses, variance analyses, and performance reports for specific products, departments, or projects. Cost Accounting is often considered a detailed subset of managerial accounting.
Purpose: To ensure compliance with government tax laws and regulations and to calculate and file all required tax returns.
Audience: Government tax authorities (like the IRS in the U.S.).
Focus: It deals exclusively with financial transactions that affect the company’s tax liability. It must adhere to the specific rules outlined in the tax code, which often differ from the standards used in Financial Accounting (GAAP).
Regulation: Governed by the Internal Revenue Code and state/local tax laws.
Output: Tax returns and documents used for Bookkeeping Services in Buffalo, sales tax, property tax, and other governmental levies.
Accounting has three major categories that are financial accounting, managerial accounting and tax accounting.