Accounting can be a perfect career choice for many students. This field requires a vast amount of knowledge and expertise. However, it can create a successful path for future growth. Usually, the goal for most accountants is to become a CFO or even a CEO in a well-reputed company. Apart from these, accountants can also start their businesses. Due to the vast amount of knowledge they have in the field, they can become successful business owners.
However, becoming an accountant requires significant effort. Usually, accountants must choose the path based on the jurisdiction where they want to operate. Sometimes, they need a degree to start working in the accounting field. However, some jurisdictions also require them to obtain a license before practising. On top of that, experience is also a critical factor in becoming an active accountant.
Once students choose the accounting field, they must also obtain expertise in various areas. These areas, or branches, of accounting, incorporate several tasks. Each branch has its usage in specific scenarios. Usually, financial and managerial accounting is the most prominent accounting branches. Both of these are crucial in helping accountants achieve success. However, some may term managerial accounting as more complicated.
Many accountants can’t choose whether to focus on financial or managerial accounting. Most of them wonder if managerial accounting is complicated. However, the answer to the question is not as straightforward. Before discussing that, it is crucial to know the various branches of accounting.
What are the branches of accounting?
Accounting involves various processes to maintain financial records. In the past, it only focused on financial accounting, which covers financial statements. However, the requirements for other accounting branches also arose due to the complex process within companies. Today, accounting encompasses many areas which are crucial for all companies.
Some of the most prominent accounting branches include the following areas.
Financial accounting is undoubtedly the essence of the accounting process. It involves recording, summarizing and reporting financial information. As mentioned above, the primary objective of this branch is to prepare financial statements. These statements summarize the financial transactions companies have had in the past. Financial accounting requires conformity to various standards, rules and regulations.
Managerial accounting is a prominent branch of accounting that focuses on decision-making. This branch covers the quality of information presented to managers. However, it does not relate to the external reporting process carried out by companies. Instead, managerial accounting focuses on providing information for decisions internally. Aside from financial accounting, managerial accounting is one of the most crucial accounting branches.
Cost accounting is a subset of managerial accounting. However, some may also consider it as a separate accounting branch. Cost accounting involves a process usually prevalent within manufacturing industries. Essentially, this branch covers the costs incurred on producing products and services. Based on the information generated from cost accounting, managers can make various decisions. Usually, these decisions involve controlling and reducing costs.
Some may argue that auditing is a separate field and does not fall under accounting. However, it is a part of the accounting branches. Auditing involves examining financial information for any discrepancies. Usually, it involves external and internal audits. Apart from these, auditing also includes various other areas. Auditing enhances the financial reporting process and other accounting branches. Like financial accounting, it also involves several standards, rules and regulations.
Tax accounting is a crucial part of the accounting process performed by companies. This branch involves planning for tax time and preparing tax returns. Usually, tax accounting occurs through an outside company or tax consultant. However, some companies may also perform this process in-house. Tax accounting primarily covers any tax-related issues within a company. Apart from that, it also focuses on reducing those taxes.
The above accounting branches are relevant to most companies. However, they may not apply to other entities, such as non-profit organizations. For those entities, fund accounting is more relevant. Fund accounting involves recording and reporting NPO funds accurately. This process is more common among charities, churches, hospitals, clubs and educational institutes. In some cases, fund accounting falls under financial accounting.
Fiduciary accounting is similar to fund accounting. It does not apply to most companies and businesses. Instead, it has a specific use. Fiduciary accounting involves managing property for another entity. A fiduciary accountant manages and accounts for the activities within this process. Similarly, fiduciary accounting involves various other branches. These include trust accounting, estate accounting and receivership.
The accounting process for government entities differs from other entities. Government accounting is an accounting branch that meets the needs of government entities. Usually, it applies to central, national and state governments. This process involves budget allocations and utilization. On top of that, it also covers keeping records and ensuring public interests. Government accounting covers a specific niche like fund and fiduciary accounting.
Forensic accounting involves calculating damages or settling disputes in legal matters. It is also called legal accounting for that reason. Usually, forensic accounting requires deep investigations, performing calculations to evaluate accounting, inquiry into fraud, etc. This accounting branch relates to auditing as it involves similar activities. However, it also includes similar activities as other accounting branches.
Is Managerial Accounting complicated?
Accounting consists of various branches. However, some accountants deem managerial accounting as the most complicated among these. Some of the reasons for such arguments may include this branch being more complex and not regulated. In most cases, managerial accounting does not involve a specific process. Therefore, accountants cannot prepare for the tasks they can perform. On top of that, this branch differs from one company to another.
One of the primary reasons most people consider managerial accounting complicated is its unconventional approach. This branch does not follow specific standards or conventions. Usually, other accounting branches may guide how to tackle issues. For example, financial and auditing come with predefined standards. However, managerial accounting does not include the same conventions.
On top of that, managerial accounting covers the quality of information rather than quantity. While it covers financial data and figures, it does not emphasize those aspects. For most accountants, this feature makes managerial accounting complicated. The focus on quality also makes calculations more complex and requires considering all sides of the equation. It implies that accountants must gather data from various sources to put into managerial accounting techniques.
Furthermore, managerial accounting also requires complex equations and calculations. Financial accounting does not entail similar equations. Usually, accountants use financial systems to process data automatically. These systems also prepare further information based on the input. The output from these systems comes through the financial statements. However, managerial accounting does not come with automatic systems.
Managerial accounting requires more manual work from accountants. Since it requires human attention, it also becomes more complex. On the other hand, automatic systems take care of most financial data and process it. That process may seem more straightforward compared to managerial accounting. Along with the unconventional approach, managerial accounting can become more complicated.
Managerial accounting also requires more human input than other branches. This input comes through the judgment of the accountant using those systems. However, the same may apply to some areas in financial accounting. On top of that, with the right preparation and knowledge, these factors may not seem as daunting. Once accountants acquire sufficient expertise in the field, they may consider managerial accounting more straightforward.
Accounting includes a broad range of branches, including managerial accounting. This branch covers the quality of financial information flowing within a company. However, some accountants may consider managerial accounting as more complicated. Various factors can contribute to that belief. However, accountants can overcome those obstacles through proper education and experience.