Different Branches of Accounting:

Accounting operates within a broad socio-economic environment, and so, the knowledge required of the accountant cannot be sharply
compartmentalized.It is therefore, difficult to discuss one area without relating to other areas of knowledge. We place a great emphasis
on the conceptual knowledge. The accountant should not only know but he should understand.
From the above it is clear that to define accounting as such, is rather difficult. Many accountants have defined Accounting in very many
languages. However, we can consider the following definitions:
1.H.Chakravorty: Accountancy is the science of recording, classifying and summarizing transactions so that relation with outsiders is
exactly determined and result of operation during a particular period can be calculated, and the financial position as the en d of the
period may be shown.
2.A.I.C.P.A.: "Accountancy may be defined as the art of recording, classifying and summarizing in a significant manner and in terms of
money, transactions and events, which are in part, at least of financial character, and interpreting the results thereof".
3.Taylor and Shearing: "Accounting may be defined as the art and science of recording business transactions in a methodological manner
so as to show: (a) the true state of affairs of a business of a particular period of time and, (b) the surplus or deficiency which has accrued
during a specific period."
It may be very aptly pronounced now-a-days that due to the spectacular development in the research and analytical aspects, Accounting,
in the present day, has not confirmed itself to only record-keeping but has spread its branches to the farthest corners of commercial
activities. As such, Accounting to-day, may be divided as follows:
1.Book-Keeping: Primary recording of the day-to-day transactions of any business unit and their subsequent posting into the Ledger
Accounts are the functions of this part of accounting. As this part of the job of the Accountant is only keeping the proper records, it is
therefore termed as Book-Keeping.
2.Accounting: To prepare the Trial Balance and thereby to check the arithmetical accuracy of the books and records, to prepare the
Revenue statements of Profit or Loss Accounts, to prepare the statement of Affairs or Balance Sheets, or , in other words, to prepare the
Final Accounts and also to make plans and programmes for smooth running of this part of Accounting procedures and to act accordingly
are, in short, the functions of the Accountant. This of his work is generally termed as accounting.
3.Cost Accounting: In any manufacturing concern, it is necessary to keep the records of daily stocks in hand, their issues and receipts,
payment of wages, calculated regarding overhead charges, fixing the sale-price of the products, to prepare the budget and thereby to
help in cost control etc.
These functions are the functions of the Cost Accountant.
4. Management Accounting: The present-day Management is very much dependent on the Accountant in all the levels of managerial
activities. By furnishing regular reports regarding various necessary information required daily by the management, the Accountant very
ably helps in their work. Cost Control, Quality Control, Budgetary Control, Planning etc.are therefore, the functions of the Management
Accountant.
5. Decision Accounting: This means that part of the functions of the Accountant by which he prepares and presents necessary
information to the Management for making decisions. This function is one which has developed a great during the recent years. As and
when there arises a particular problem in any business unit, the accounting personnel are thereupon called to present the nec essary
information in all possible details and in a most appropriate manner. Decision Accounting is thus, a part of the Managerial Accounting.
6.Household Accounting: With the development of the Socialistic Pattern of economy and the emergence of the Welfare States, the
present-days Governments in all the countries in the World are becoming more and more interested in collecting taxes not only form the
corporate bodies of form the employed persons but also from the self-employed men and professional personalities. These types of
persons are now required to maintain their professional accounts Household Income and Expenditure Accounts separately.
7. Government Accounting: Government Accounting is quite different from Commercial Accounting. This is because in Welfare States is
present day World, any Government has to collect taxes, compute National Income, fix the Gross National Product Target, ascertain the
Balance of Payments position etc.governments, therefore have their own system of Accounting which is called Government Accoun ting.
8. Auditing: Whether the Books of Accounting have been maintained correctly or not has to be proved.
For this purpose, the Accounts are to be checked by some qualified persons from the Book of Prime entry up to the Final Accounts every
year. This is also necessary for the benefit of the share-holders as well as for the Government which will collect taxes on the basis of the
Published Accounts.

INTERNAL & EXTERNAL AUDITS: FIRST-, SECOND-, AND THIRD-PARTY AUDITS

A first-party audit is performed within an organization to measure its strengths and weaknesses against its own procedures or methods
and/or against external standards adopted by (voluntary) or imposed on (mandatory) the organization. A first-party audit is an internal audit
conducted by auditors who are employed by the organization being audited but who have no vested interest in the audit results of the area
being audited.
A second-party audit is an external audit performed on a supplier by a customer or by a contracted organization on behalf of a customer. A
contract is in place, and the goods or services are being, or will be, delivered. Second-party audits are subject to the rules of contract law, as
they are providing contractual direction from the customer to the supplier. Second-party audits tend to be more formal than first-party audits
because audit results could influence the customers purchasing decisions.
A third-party audit is performed by an audit organization independent of the customer-supplier relationship and is free of any conflict of
interest. Independence of the audit organization is a key component of a third-party audit. Third-party audits may result in certification,
registration, recognition, an award, license approval, a citation, a fine, or a penalty issued by the third-party organization or an interested
party.

PURPOSES OF AUDITS
 An auditor may specialize in types of audits based on the audit purpose, such as to verify compliance, conformance, or performance. Some
audits have special administrative purposes such as auditing documents, risk, or performance or following up on completed corrective
actions.

Certification

Companies in certain high-risk categoriessuch as toys, pressure vessels, elevators, gas appliances, and electrical and medical devices
wanting to do business in Europe must comply with Conformit Europenne Mark (CE Mark) requirements. One way for organizations to
comply is to have their management system certified by a third-party audit organization to management system requirement criteria (such
as ISO 9001).

Customers may suggest or require that their suppliers conform to ISO 9001, ISO 14001, or safety criteria, and federal regulations and
requirements may also apply. A third-party audit normally results in the issuance of a certificate stating that the auditee organization
management system complies with the requirements of a pertinent standard or regulation.

Third-party audits for system certification should be performed by organizations that have been evaluated and accredited by an established
accreditation board, such as the ANSI-ASQ National Accreditation Board (ANAB).

Performance versus compliance/conformance audits

Various authors use the following terms to describe an audit purpose beyond compliance and conformance: value-added assessments,
management audits, added value auditing, and continual improvement assessment. The purpose of these audits goes beyond traditional
compliance and conformance audits. The audit purpose relates to organization performance. Audits that determine compliance and
conformance are not focused on good or poor performance. Yet performance is an important concern for most organizations.

A key difference between compliance/conformance audits and audits designed to promote improvement is the collection of audit evidence
related to organization performance versus evidence to verify conformance or compliance to a standard or procedure. An organization may
conform to its procedures for taking orders, but if every order is subsequently changed two or three times, management may have cause for
concern and want to rectify the inefficiency.

Follow-up audit

A product, process, or system audit may have findings that require correction and corrective action. Since most corrective actions cannot be
performed at the time of the audit, the audit program manager may require a follow-up audit to verify that corrections were made and
corrective actions were taken. Due to the high cost of a single-purpose follow-up audit, it is normally combined with the next scheduled audit
of the area. However, this decision should be based on the importance and risk of the finding.

An organization may also conduct follow-up audits to verify preventive actions were taken as a result of performance issues that may be
reported as opportunities for improvement. Other times organizations may forward identified performance issues to management for follow-
up.

4 PHASES OF AN AUDIT

1. Audit preparation Audit preparation consists of everything that is done in advance by interested parties, such as the auditor, the lead
auditor, the client, and the audit program manager, to ensure that the audit complies with the clients objective. The preparation stage of an
audit begins with the decision to conduct the audit. Preparation ends when the audit itself begins.
2. Audit performance The performance phase of an audit is often called the fieldwork. It is the data-gathering portion of the audit and covers
the time period from arrival at the audit location up to the exit meeting. It consists of activities including on-site audit management, meeting
with the auditee, understanding the process and system controls and verifying that these controls work, communicating among team
members, and communicating with the auditee.
3. Audit reporting The purpose of the audit report is to communicate the results of the investigation. The report should provide correct and
clear data that will be effective as a management aid in addressing important organizational issues. The audit process may end when the
report is issued by the lead auditor or after follow-up actions are completed.
4. Audit follow-up and closure According to ISO 19011, clause 6.6, The audit is completed when all the planned audit activities have been
carried out, or otherwise agreed with the audit client. Clause 6.7 of ISO 19011 continues by stating that verification of follow-up actions may
be part of a subsequent audit.
 Note: Requests for correcting nonconformities or findings are very common. Corrective action is action taken to eliminate the causes of an
existing nonconformity, defect, or other undesirable situation in order to prevent recurrence (reactive). Corrective action is about eliminating
the causes of problems and not just following a series of problem-solving steps. Preventive action is action taken to eliminate the causes of a
potential nonconformity, defect, or other undesirable situation in order to prevent occurrence (proactive).

As a result of economic, industrial, and technological developments, different specialized fields in accounting have emerged.
The famous branches or types of accounting include: financial accounting, managerial accounting, cost accounting, auditing, taxation, AIS, fiduciary,
and forensic accounting.
1. Financial Accounting
Financial accounting involves recording and classifying business transactions, and preparing and presenting financial statements to be used by internal
and external users.
In the preparation of financial statements, strict compliance withgenerally accepted accounting principles or GAAP is observed. Financial accounting is
primarily concerned in processing historicaldata.
2. Managerial Accounting
Managerial or management accounting focuses on providing information for use by internal users, the management. This branch deals with the needs
of the management rather than strict compliance with generally accepted accounting principles.
Managerial accounting involves financial analysis, budgeting and forecasting, cost analysis, evaluation of business decisions, and similar areas.
3. Cost Accounting
Sometimes considered as a subset of management accounting, cost accounting refers to the recording, presentation, and analysis of manufacturing
costs. Cost accounting is very useful in manufacturing businesses since they have the most complicated costing process.
Cost accountants also analyze actual and standard costs to help managers determine future courses of action regarding the company's operations.
4. Auditing
External auditing refers to the examination of financial statements by an independent party with the purpose of expressing an opinion as to fairness of
presentation and compliance with GAAP. Internal auditing focuses on evaluating the adequacy of a company's internal control structure by testing
segregation of duties, policies and procedures, degrees of authorization, and other controls implemented by management.
5. Tax Accounting
Tax accounting helps clients follow rules set by tax authorities. It includes tax planning and preparation of tax returns. It also involves determination of
income tax and other taxes, tax advisory services such as ways to minimize taxes legally, evaluation of the consequences of tax decisions, and other
tax-related matters.
6. Accounting Information Systems
Accounting information systems (AIS) involves the development, installation, implementation, and monitoring of accounting procedures and systems
used in the accounting process. It includes the employment of business forms, accounting personnel direction, and software management.
7. Fiduciary Accounting
Fiduciary accounting involves handling of accounts managed by a person entrusted with the custody and management of property of or for the benefit
of another person. Examples of fiduciary accounting include trust accounting, receivership, and estate accounting.
8. Forensic Accounting
Forensic accounting involves court and litigation cases, fraud investigation, claims and dispute resolution, and other areas that involve legal matters.
This is one of the popular trends in accounting today.
Focusing on a Specialization
If you want to focus on a specialization, you may want to consider obtaining an accounting certification in your chosen field. It will give you an edge
over those who are uncertified. Due to the increasing population and demand for competitive professionals, you need to step it up a little to get
recognized.
Some of the most famous certifications include the Certified Public Accountant (CPA), Certified Management Accountant (CMA), Certified Internal
Auditor (CIA), Certified Financial Planner (CFP), and Certified Information Systems Auditor (CISA).

Types of Audit Engagements

Audit is an appraisal activity undertaken by an independent practitioner (e.g. an external auditor) to provide assurance to a principal (e.g. shareholders)
over a subject matter (e.g. financial statements) which is the primary responsibility of another person (e.g. directors) against a given criteria or
framework (e.g. IFRS and GAAP).

Main types of audit engagements

and services include:

External Audit
Internal Audit
Forensic Audit
 Public Sector Audit
Tax Audit
Information System Audit
Environmental & Social Audit
Compliance Audit
Value For Money Audit

External
External audit, also known as financial audit and statutory audit, involves the examination of the truth and fairness of the financial statements of an
entity by an external auditor who is independent of the organization in accordance with a reporting framework such as the IFRS. Company law in most
jurisdictions requires external audit on annual basis for companies above a certain size.

The need for an external audit primarily stems from the separation of ownership and control in large companies in which shareholders nominate
directors to run the affairs of the company on their behalf. As the directors report on the financial performance and position of the company,
shareholders need assurance over the accuracy of the financial statements before placing any reliance on them. External audit provides reasonable
assurance to the owners of the company that the financial statements, as reported by the directors, are free from material misstatements.

External auditors are required to comply with professional auditing standards such as the International Standards on Auditing and ethical guidelines
such as those issued by IFAC in order to maintain a level of quality and trust of all stakeholders in the auditing exercise.

Internal
Internal audit, also referred as operational audit, is a voluntary appraisal activity undertaken by an organization to provide assurance over the
effectiveness of internal controls, risk management and governance to facilitate the achievement of organizational objectives. Internal audit is
performed by employees of the organization who report to the audit committee of the board of directors as opposed to external audit which is carried
out by professionals independent of the organization and who report to the shareholders via audit report.

Unlike external audit, whose scope is primarily restricted to matters that concern the financial statements, the scope of work of an internal audit is very
broad and can encompass any matters which can affect the achievement of organizational objectives. Internal audit is typically centered around certain
key activities which include:
Monitoring the effectiveness of internal controls and proposing improvements
Investigating instances of fraud and theft
Monitoring compliance with laws and regulations
Reviewing and verifying where necessary the financial and operating information
Evaluating risk management policies and procedures of the company
Examining the effectiveness, efficiency and economy of operations and processes

Forensic
Forensic Audit involves the use of auditing and investigative skills to situations that may involve legal implications. Forensic audits may be required in
the following instances:
Fraud investigations involving misappropriation of funds, money laundering, tax evasion and insider trading
Quantification of loss in case of insurance claims
Determination of the profit share of business partners in case of a dispute
Determination of claims of professional negligence relating to the accountancy profession

Findings of a forensic audit could be used in the court of law as expert opinion on financial matters.

Public Sector
State owned companies and institutions are required by law in several jurisdictions to have their affairs examined by a public sector auditor. In many
countries, public sector audits are conducted under the supervision of the auditor general which is an institute responsible for strengthening public
sector accountability and governance and promoting transparency.

Public sector audit involves the scrutiny of the financial affairs of the state owned enterprises to assess whether they have been operated in way which
is in the best interest of the public and whether standard procedures have been followed to comply with the requirements in place to promote
transparency and good governance (e.g. public sector procurement rules). Public sector audit therefore goes a step further than the financial audit of
private organizations which primarily focuses on the reliability of financial statements

Audits of public sector companies are becoming increasingly concerned with the efficiency, effectiveness and economy of resources used in state
organizations which has given way for the development of value for money audits.

Tax
Tax audits are conducted to assess the accuracy of the tax returns filed by a company and are therefore used to determine the amount of any over or
under assessment of tax liability towards the tax authorities.

In some jurisdictions, companies above a certain size are required to have tax audits after regular intervals while in other jurisdictions random
companies are selected for tax audits through the operation of a balloting system.

Information System
Information system audit involves the assessment of the controls relevant to the IT infrastructure within an organization. Information system audits may
be performed as part of the internal control assessment during internal or external audit.

Information system audit generally comprises of the evaluation of the following aspects of information system:
Design and internal controls of the system
Information security and privacy
Operational effectiveness and efficiency
Information processing and data integrity
System development standards

Environmental & Social

Environmental & Social Audits involve the assessment of environmental and social footprints that an organization leaves as a consequence of its
economic activities. The need for environmental auditing is increasing due to higher number of companies providing environment and sustainability
reports in their annual report describing the impact of their business activities on the environment and society and the initiatives taken by them to
reduce any adverse consequences.

Environmental auditing has provided a means for providing assurance on the accuracy of the statements and claims made in such reports. If for
example a company discloses the level of CO2 emissions during a period in its sustainability report, an environment auditor would verify the assertion
by gathering relevant audit evidence.

Compliance
In many countries, companies are required to conduct specific audit engagements other than the statutory audit to comply with the requirements of
particular laws and regulations. Examples of such audits include:
Verification of reserves available for distribution to shareholders before the declaration of interim dividend
Audit of the statement of assets and liabilities submitted by a company at the time of liquidation
Performance of cost audit of manufacturing companies to verify the cost of production in order for a regulator to determine the maximum price
to be allowedafter allowing a reasonable profit margin to companies operating in a sensitive sector (e.g. pharmaceuticals industry)

Value For Money

Value for money audits involves the assessment of the efficiency, effectiveness and economy of an organization's use of resources.

Value for money audits are increasingly relevant to sectors which do not have profit as their main objective such as the public sector and charities.
They are usually performed as part of internal audit or public sector audit.

The Importance of an Audit System to Companies

by Jeff Clements
 Related Articles
1The Importance of the Internal Audit Function in a Company
2What Are the 4 Types of Audit Reports?
3Why Is it Important for a Company to Have an External or Internal Audit System?
4Importance of an External Audit

Auditing is a means of evaluating the effectiveness of a company's internal controls. Maintaining an effective system of internal controls is vital for

achieving a company's business objectives, obtaining reliable financial reporting on its operations, preventing fraud and misappropriation of its assets, and

minimizing its cost of capital. Both internal and independent auditors contribute to a company's audit system in different but important ways.
Business Objectives

Having an effective audit system is important for a company because it enables it to pursue and attain its various corporate objectives. Business processes

need various forms of internal control to facilitate supervision and monitoring, prevent and detect irregular transactions, measure ongoing performance,

maintain adequate business records and to promote operational productivity. Internal auditors review the design of the internal controls and informally

propose improvements, and document any material irregularities to enable further investigation by management if it is warranted under the circumstances.

Risk of Misstatement

Auditors assess the risk of material misstatement in a company's financial reports. Without a system of internal controls or an audit system, a company

would not be able to create reliable financial reports for internal or external purposes. Thus, it would not be able to determine how to allocate its resources

and would be unable to know which of its segments or product lines are profitable and which are not. Additionally, it could not manage its affairs, as it

would not have the ability to tell the status of its assets and liabilities and would be rendered undependable in the marketplace due to its inability to

consistently produce its goods and services in a reliable fashion. Accordingly, an audit system is crucial in preventing debilitating misstatements in a

company's records and reports.

Fraud Prevention

Internal audit serves an important role for companies in fraud prevention. Recurring analysis of a company's operations and maintaining rigorous systems

of internal controls can prevent and detect various forms of fraud and other accounting irregularities. Audit professionals assist in the design and

modification of internal control systems the purpose of which includes, among other things, fraud prevention. An important part of prevention can be

deterrence, and if a company is known to have an active and diligent audit system in place, by reputation alone it may prevent an employee or vendor from

attempting a scheme to defraud the company.

 Cost of Capital

The cost of capital is important for every company, regardless of its size. Cost of capital is largely comprised of the risk associated with an investment, and

if an investment has more risk, an investor will require a higher rate of return to invest. Strong audit systems can reduce various forms of risk in an

enterprise, including its information risk (the risk of material misstatement in financial reporting), the risk of fraud and misappropriation of assets, as well

the risk of suboptimal management due to insufficient information on its operations.

Auditing is a means of evaluating the inefficiency of a companys internal controls. Retaining an effective system of internal controls is vital for The
Companys aim, gaining trustworthy financial reporting on its operations, precluding fraud and misuse of its assets, and lessening its cost of capital.
Why do we need an auditor?

An effective auditing system is a vital for any company because it facilitates to pursue and attain its several corporate purposes. Corporate process needs
several forms of internal control to simplify supervision and observing, prevent and identify irregular transaction, measure the corporate performance,
maintain adequate business records and to promote productivity. The Auditors review the design of interior controls and informally propose improvements,
and all documents and irregularities to enable further investigation by management if there is to be found.
Misstatement

Auditors will assess the risk of material misstatement in a companys financial reports. Without a system for internal controls or an auditing system, a
company is incapable to create reliable financial reports for interior or external purposes. And it would not be able to define how to allocate its resources
and would be unable to know which of its divisions or product lines are profitable and which are not. To sum it, they could not manage its undertakings, as
it would not have the ability to tell the status of its assets and liabilities and would be rendered untrustworthy in the marketplace due to its inability to
consistently produce its goods and services in a reliable manner. Hence, an auditing system is crucial in preventing debilitating misstatements in a
companys records and reports.
Fraud

Audit firms in dubai serves an important role for companies in fraud prevention. Frequent analysis of a companys operations and preserving rigorous
systems of internal controls can prevent and detect countless forms of fraud and other accounting irregularities. Audit professionals, like Farahat & Co. can
assist in the design and modification of internal control systems with the purpose of which includes, between other things, fraud prevention. One of the
important parts of anticipation can be deterrence, and if a business is known to have an active and diligent auditing system in place, by repute alone it may
prevent an employee or vendor from attempting a scheme to defraud the company.

Tax accounting focuses on the preparation, analysis and presentation of tax returns and tax payments.

HOW IT WORKS (EXAMPLE):

For example, Company XYZ might use one accounting method for calculating depreciation when it reports financial results
to investors, but tax laws may require it to use a different method for tax accounting purposes. As a result, Company XYZ
might have one net income number on the financial statements filed with the SEC and a different net income number filed
with the IRS.

WHY IT MATTERS:
Although tax accounting largely follows generally accepted accounting principles (GAAP), in a few ways it is quite different.
This is why you might hear analysts discussing the difference between "book and tax," meaning the differences
between GAAP accounting and tax accounting. Tax accounting takes special training and education, which is why some
accountants specialize only in taxes.

1. Work
2. Careers
3. Accounting & Auditing Jobs

The Role of Tax Accountants

by Rose Johnson

Related Articles
1What Is a Tax Consultant?
2Responsibilities of a Tax Preparer
3What Are the Working Conditions for a Tax Accountant?
4Career Outlook for Tax Preparers

Tax laws often undergo changes and can be complex. Tax accountants ensure that companies and individuals comply with tax laws by filing

their federal and state income tax returns. Some tax accountants also offer tax planning advice to help businesses and individuals save

money in taxes. A career in tax accounting is challenging, but also rewarding. A tax accountant career requires following a specific education

and career path. It is important to understand the job requirements.

Tax Return Preparation

Self-employed tax accountants and those who work for accounting firms specialize in assisting clients with tax return preparation. Tax

accountants meet with clients to assess their financial needs. Part of the meeting consists of gathering needed documentation, such as

paystubs, investment income statements and other financial documents. Tax accountants must maintain familiarity with tax laws. They often

look for tax deductions and credits for their clients and determine how much tax is owed.

Tax Planning

Nearly every corporate business decision leads to tax ramifications, which can be quite complex in nature. Companies that do business

internationally may experience further complexities. This leads to growing needs for tax planning professionals. Some tax accountants

choose to specialize in tax planning. The primary objective is to develop a strategy around the clients financial situation to minimize income

tax. Corporations hire internal and external tax accountants to develop long-term plans that save the company money in taxes over time.

Education

Most tax accountants earn a bachelors or masters degree in accounting, and new graduates seek internal tax accounting positions or jobs

with public accounting firms. You can enjoy a competitive edge over other candidates if you are ready to take the certified public accountant

(CPA) exam upon graduation. CPA requirements vary per state, but in most states you must obtain 150 college credits to sit for the exam.

Some tax accountants go on to become directors and partners within their firms.
Good and Bad

A tax accountant career often appeals to individuals who enjoy working with numbers, solving problems and meeting challenges. Tax

accountants do more than prepare tax returns. They should possess a thorough understanding of tax laws. If you like a fast-paced work

environment and enjoy research, you might consider a tax accountant career as a good choice. The downside is that tax accountants work

long hours, especially during tax season. The deadlines can seem overwhelming to some people. Entry-level tax accountants also face a

steep learning curve.

Cost Accounting Jobs

Cost accounting is a facet of management accounting that determines the actual cost associated with manufacturing a product or providing a
service by looking at all expenses within the supply chain. It is done for the purpose of budget preparation and profitability analysis. The
information derived from this process is useful to managers in determining which products, departments or services are most profitable and
which ones need improvement.
Cost accounting involves determining fixed and variable costs. Fixed costs are expenses that recur each month regardless of the level of
production. Examples include rent, depreciation, interest on loans and lease expenses. Variable costs are expenses that fluctuate with
changes in production level, such as supplies, labor, and maintenance expenses. These costs are related to production in that the more units
of a product produced, the more expense there is associated with the materials and labor that went into making the product.

Cost accounting determines both fixed and variable costs associated with a product line to determine the break even point, and then
ultimately the profit. The break even point represents the point at which expenses are covered by sales. Profit is determined by using the
break-even point as the starting point for calculating profit. All sales beyond the break even point are profit. Determining the number of units
that need to be sold to reach the break even point and then achieve profit is know as cost-volume-profit analysis.

The Role of a Cost Accountant

While most cost accountants work in government organizations or large companies, some will work as consultants either through public
accounting firms or their own independent practice. Private consultants will often be called upon to perform services for small or mid-sized
businesses that cannot substantiate the full-time employment of a cost accountant. Those who are employed full-time will perform a wide
variety of duties:

Providing data for stable budget developments

Using software to allocate indirect costs to internal processes
Detailed analysis on suitable cost drivers
Evaluation of potential business ventures

Cost accountants should be familiar with all of the methods of cost accounting, as well as the software programs that support cost accounting
functions. There are four primary methods of cost accounting, each of which allocates indirect costs to individual product lines and / or
services:

Standard Costing System assigns an average cost to each direct cost (labor, material, overhead, etc) associated with a product
so as to standardize the cost accounting system. This is one of the more popular methods of cost accounting used by small and
medium sized businesses because of its simplicity.
Activity-based Costing determines fixed and variable costs in proportion to the direct cost associated with a product line.
Throughput Accounting focuses on the expansion of an organizations efficiency, by reducing production bottlenecks and/or
limitations and thereby maximizing throughput.
Cost-Volume-Profit (CVP) Analysis determines total fixed and variable costs based on the total quantity of products produced. It
uses this information to calculate a companys breakeven point, or the production level at which it will begin to earn a profit.

While many software packages are specific to particular industries, popular programs include SAP, Oracle, and JD Edwards. Familiarity with
these packages will strengthen a cost accountants ability to perform and analyze data at foundation levels. Cost Accountants should stay
abreast of new developments in accounting technology and trends, to ensure efficiency and effectiveness.
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Education Required
Obtaining the title cost accountant does not have any educational requirements in itself. However, many companies and governmental
agencies have a minimum education requirement before promoting a candidate into the position. For most professions, this is a bachelors
degree in accounting or finance. These undergraduate programs will likely include at least one course dedicated to cost accounting, and the
different methodologies employed.
Candidates wishing to heighten their marketability as a Cost Accountant should consider a post-graduate degree such as a Masters in
Business Administration (MBA). Obtaining such a degree can increase a professionals likelihood of obtaining a management position in the
future.

Certifications and Associations

Certified Public Accountant
Like many other accounting career paths, obtaining licensure as a certified public accountant (CPA) will appropriately position a candidate for
cost accounting jobs. To be eligible to take the Uniform CPA Exam, an applicant generally must have 150 college credit hours in relevant
coursework, including accounting, finance, business management, and ethical standards. Upon passing the four-part CPA exam, many
states will also require a certain amount of experience before issuing a CPA designation.

CPAs are commonly supporting by two primary organizations, one at the national level and another at the state. The national organization is
the American Institute of Certified Public Accountants (AICPA). Both associations provide members with education, networking and
leadership opportunities.

Certified Cost Accountant

The Institute of Certified Cost and Management Accountants offers a Certified Cost Accountant (CCA) program for accountants specializing
in cost accounting. This credential is designed to substantiate an accountants proficiency in cost accounting methods, technology and
implementation.

To obtain CCA certification, a candidate must be a member in good standing with the Institute of Certified Cost Accountants (ICCA). An ICCA
membership requires a degree in higher education, usually a bachelors or an MBA. In addition, candidates must have a passing score (60%
or higher) on the four-hour CCA examination.

Similar to a CPA certification, CCAs must adhere to continuing education requirements to be eligible for license renewal. A CCA must
acquire at least 60 hours of continuing education every three years. They must also keep their membership in the ICCA current by paying an
annual fee.

Salary
According to Robert Half Company, an entry-level cost accountant position in a large corporation will pay an average annul salary of
approximately $43,570. Cost accountants at the management level in a large company will earn $84,375 annually. An entry-level cost
accountant position in a mid-sized company will pay around $41,625 annually, increasing to $73,375 at the management level.

As corporate management continues to increase the focus on profitability across all product lines, the demand for proficient and
knowledgeable cost accountants will also increase.

cost accounting
Definition
Related Terms
A method of accounting in which all costs incurred in carrying out an activity or accomplishing a purpose are collected, classified, and
recorded. This data is then summarized and analyzed to arrive at a selling price, or to determine where savings are possible.
In contrast to financial accounting (which considers money as the measure of economic performance) cost accounting considers money as
the economic factor of production.

Read more: http://www.businessdictionary.com/definition/cost-accounting.html

ax accounting is one of the most important domains in the areas of finance. It is really important that the businesses in order to maintain a smooth functioning of

their finances keep a sufficient knowledge about the various tax accounting methods that can choose from depending upon the nature and the size of their

businesses. It is quite but natural that the businesses that are run in order to earn profits are under obligation to pay the taxes to the government. There are

several methods of paying taxes that can be used in order to reduce your taxes.

In general the taxes fall into two categories:

a) The cash method of taxing

b) The accrual method of taxing

It is the decision of the company or the business that decides the tax accounting method that it needs to adopt that is in compliance with the nature and size of its

business. For instance if the company is a small business then in order to be in compliance with the federal tax authorities, it is always advisable that the owner

choose cash tax accounting method.

The business tax accounting method that is used by the organization can be changed by the taxpayer. In such a case the tax payer needs to have the consent of

the secretary of the treasury.

Advantages of using the tax accounting methods are:

1) The company shows goodwill as far as legal compliance is concerned

2) Assists in the faster decision making by having a clear picture of the finances of the company

3) It also helps in maintaining a clear and an accurate budget that gives a correct idea of the profits as well as losses of the company

4) It also helps in maintaining a better record keeping by getting rid of the unnecessary details as well as information.

The business tax accounting can go a long way in determining the future of the company. Well maintained records can really be the boon to the company as that

would always show the clear picture of the company's standing as far as the finances are concerned. Also at the time of filing the taxes, a well maintained record

can go a long way in saving money while filing tax returns.

Article Source: http://EzineArticles.com/3937244

Accounting Three Major Areas

DECEMBER 1, 2015

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There are three major functional areas in accounting, which need to be considered in modern day accounting for any business. The three are
financial, cost and management accounting.
The first area, namely financial accounting, is primarily useful for ascertaining the results of the business on a periodical basis; for example,
one year. This will help to determine the future course of action in the long term. In economical terms, financial accounting treats money as a
factor of production.

Cost and management accounting are tools to enable management to take decisions on a day-to-day basis. Cost and management
accounting are not useful for their own sake. These two functions assist management in the conduct of the business along with other key
factors involved in running of the business. Key factors could be demand, supply, competition, availability of raw material, logistics etc.

The second area, namely cost accounting, seeks to ascertain the value of direct costs and indirect costs involved in production . From this
value, management can make an informed decision regarding the improvement of production performance. In economic terms, cost
accounting is a measure of economic performance. This information gives management a clear indication of economic performance of the
production resources of the business.

Costing also helps the sales manager in setting prices. But since costing is a measure of economic performance, it cannot be considered as
an absolutely accurate basis for setting prices. This is because selling prices are more of an economic decision. It would not be amiss to
mention here that prices depend basically on market factors. Prices depend more on demand, supply and competition and less on costs. For
example, high demand coupled with lack of competition would mean that business could charge higher prices for its products, well above the
costs.

The third area, namely management accounting, is closely interrelated with costing accounting. Although it has evolved from cost
accounting, management accounting has a broader role to play in management decisions. It measures economic performance of the
business enterprise as a whole, vis-a-vis the economic environment in which the business operates. This function of accounting seeks to
combine the financial and cost information in a broader aspect.

Finally, management accounting is instrumental in assisting and advising management in making important business decisions. It makes
management aware of the economic implications and consequences of their decisions. In economic terms, it implies a close study of money
as an economic resource, while simultaneously treating it as a measure of economic performance. This enables management to measure it
as an economic factor of production, e.g. the rate of return on capital employed.

It is thus seen that accounting has a distinct role to play in three different areas, which are equally vital. With the advent of computerised
accounting, it has become very easy for management to monitor the accounting information on the tips of its fingers. Financial accounting
programs enable financial statements and various cost and MIS statements to be produced almost instantly at push of a button. Now, only
the laborious part of accounting is data entry. Financial managers must ensure that meaningful data is input into the system to produce
meaningful information. Proper categorisation must be done and keying errors avoided at all costs, ensuring providing accurate financial
information to management.

Cost Accounting
In the calculation of the entrepreneur costs are the amount of money required for the procurement of the factors of production.

The entrepreneur is intent upon embarking upon those business projects from which he expects the highest surplus of proceeds
over costs and upon shunning projects from which he expects a lower [p. 340] amount of profit or even a loss. In doing this he
adjusts his effort to the best possible satisfaction of the needs of the consumers. The fact that a project is not profitable because
costs are higher than proceeds is the outcome of the fact that there is a more useful employment available for the factors of
production required. There are other products in the purchase of which the consumers are prepared to allow for the prices of these
factors of production. But the consumers are not prepared to pay these prices in buying the commodity the production of which is
not profitable.

Cost accounting is affected by the fact that the two following conditions are not always present:
First, every increase in the quantity of factors expended for the production of a consumers' good increases its power to remove
uneasiness.

Second, every increase in the quantity of a consumers' good requires a proportional increase in the expenditure of factors of
production or even a more than proportional increase in their expenditure.

If both these conditions were always and without any exception fulfilled, every increment z expended for increasing the quantity m of
a commodity g would be employed for the satisfaction of a need viewed as less urgent than the least urgent need already satisfied
by the quantity m available previously. At the same time the increment z would require the employment of factors of production to be
withdrawn from the satisfaction of other needs considered as more pressing than those needs whose satisfaction was foregone in
order to produce the marginal unit of m. One the one hand the marginal value of the satisfaction derived from the increase in the
quantity available of g would drop. On the other hand the costs required for the production of additional quantities of g would
increase in marginal disutility: factors of production would be withheld from employments in which they could satisfy more urgent
needs. Production must stop at the point at which the marginal utility of the increment no longer compensates for the marginal
increase in the disutility of costs.

Now these two conditions are present very often, but not generally without exception. There exist many commodities of all orders of
goods whose physical structure is not homogeneous and which are therefore not perfectly divisible.