05 Oct What are the different branches of accounting?
Accounting is a varied profession and there is no one size fits all. To meet the needs of different clients and different businesses, there are several different fields of accounting. Here are some of the different areas that accounting can branch into:
For a business or industry, this type of accounting involves calculating the cost of products manufactured and the cost of materials, compared to how much a product is sold for. It can identify areas of wastage and loss, saving the business money and improving the financial forecast of the organisation. When the price of goods is set, it is after careful calculations have been done taking into account the costs of both manufacturing and non-manufacturing activities. This is the role of a Cost Accountant.
This branch of accounting is involved in calculating the exact profit and loss figures for businesses within a set time period. After determining this information, the financial accountant can give a detailed report on the financial health of a business at that time. The reports produced by a financial accountant are useful for many different people involved in an organisation, including shareholders. Find out how Cheltenham accountants can help your business. Visit a site like Cheltenham accountants Randall & Payne for more information.
The purpose of managerial accounting is to provide regular valuable financial information to management in order for them to be able to make business decisions. Operational decisions can only be made effectively if those making the decisions are aware of information such as available budgets and financial health.
So, what are some of the different techniques used in these branches of accounting:
- Capital Budgeting
This relates to analysing data in order to be able to make informed decisions about capital expenditure that are often made by management.
- Trend Analysis
This is all about looking at data and recognising patterns and trends. It also looks at any variances in costs which enables an accountant to make forecasts for the future.
- Margin Analysis
This examines the advantages of optimising production and is one of the most important aspects of managerial accounting. It seeks to find the point at which a company breaks even and what can be done to sales for this to be pushed into profit.
- Constraint Analysis
This technique takes a look at areas of the business where inefficiencies might be affecting a company’s bottom line. Are production lines encountering bottlenecks, for example, that could be holding things up? An analysis of how production can be made more efficient will help a business to become more profitable as well.
- Inventory Valuation
As the name suggests, this part of accounting examines the real costs of a company’s inventory. Accountants can perform detailed analyses of overhead costs and the actual costs to a business of the production of their goods, known as ‘cost of goods sold’.