One of the most important categories of accounting is tax accounting, especially for real businesses. Tax accounting focuses on tracking income, expenses, and transactions in a way that complies with government tax laws and regulations. Businesses rely on accurate bookkeeping to calculate sales tax, payroll tax, and income tax correctly.

Unlike financial accounting, which follows GAAP, tax accounting follows tax codes set by federal, state, and local authorities. Proper tax records help businesses avoid penalties, stay compliant, and prepare smooth tax filings. This is why strong day-to-day bookkeeping plays a key role in supporting accurate tax reporting for small businesses.