How do you plan on expanding your business without knowing how many resources you are left with, how much revenue you can expect, and how much money has been spent on taxation? You simply can’t!
Every business needs a stable accounting department responsible for keeping the owners updated about the current financial position along with anticipated percentages of profit or loss.
8 Types of Accounting Practices
To keep your finances straight and up-to-date with the company’s cash flow, you must be familiar with all eight types of accounting.
- Public Accounting
As the name suggests, public accounting is a practice where a businessman allows an independent accounting firm’s certified public accountants (CPAs) to keep their company’s accounts, financial records, bank statements, and related information in check and balance as a few of the financial documents are necessary to be publicized. UAE has plenty of well-known public accounting firms offering additional services, such as bookkeeping, financial consulting, and payroll services, apart from auditing and taxation.
The firm will be held accountable for strategizing business plans, suggesting profitable mergers, and making acquisitions while keeping the internal accounting system streamlined.
- Private Accounting
It is an accounting practice where an accounting professional (expert) is recruited to bring the business’s accounting and other information in order. He is responsible for recording finances properly and keeping them updated. The accountant will be provided full authority to tackle all financial, tax-related, and managerial accounting issues within the organization.
- Government Accounting
A practice where government agencies responsibly deploy state auditors (or equally eligible individuals) for recording, creating, and anticipating budget (income and expenditures) in accordance with the Governmental Accounting Standards Board (GASB). Agencies will set reporting standards and track:
- How public money is being spent
- Amount of the remaining available funds
It is a valuable step in ensuring that financial, accounting, and related information is accurate.
- Financial Accounting
This accounting principle is a traditional practice and serves the purpose of keeping an updated record of each transaction, maintaining a balance sheet for trailing the financial situation, pinning down assets and liabilities, informing shareholders about the financial shifts, and providing the owners with the detailed summary of cash flow. A financial accountant expert (secretaries, stock intermediaries, chartered accountants, etc.) is obliged to follow internationally or locally recognized accounting standards to prepare financial statements and the statement of change in equity.
Two main types of financial accounting are cash accounting (mainly practiced by SMEs) and accrual accounting (suitable for larger businesses). It is necessary to define the company’s existing financial status.
- Cost Accounting
It only collects and analyze information regarding the company’s expenditure on manufacturing products. Cost accounting helps you make sensible decisions about future inventory, production, manufacturing, and supply spending. It comprises fixed costs, variable costs or input costs, etc. and is aimed at finding the cost gap between the estimated and the actual cost of production.
- Forensic Accounting
Forensic accounting is inevitable for any business as it serves the function of a financial detective, responsible for:
- Scheduling timely evaluations to get a hold of financial fraud
- Finding lawful proof of malpractices
- Submitting evidence to the courts to prove the case of embezzlement
- Writing an accounting report in easy terms for the court to explain if the company is carrying out illegal procedures
- Analyzing data to determine the missing amount
- Suggesting practicable solutions to recover the lost amount
- Highlighting misstatements and verifying controls
You can either keep it in-house or hire forensic accountants.
- Management Accounting
Like financial accounting, management accounting involves using statistical tools and approaches for recording data and analyzing financial transactions. By using these statistics, accountants manage to infer current or upcoming trends as well as forecast financial liabilities. It not only considers the company’s expenses but also non-financial aspects of the business to make profitable decisions.
The three most common categories of management accounting include strategic, performance, and risk management. Depending on your business needs, you can implement one or all three at once for obtaining information.
- Tax Accounting
A type of accounting solely designed to check the company’s tax liabilities: registration, returns, deregistration, and payments.
In UAE, tax accountants take care of VAT-related issues. They check if your company needs to pay tax, what amount, and when. With their proper help, you will be paying the respected amount of taxation without delays, saving you from administrative penalties. It ensures that you are following all-time changing tax laws.
How Profit Plus Can Help in Accounting
Outsourcing your accounting needs is beneficial for highlighting high-level risks of future events and preparing you to embrace unforeseen circumstances. Profit Plus has qualified British accountants for delivering high-class accounting practices and maintaining financial transactions properly for SMEs and large companies to survive in the long run. We will not only let you save big on money but also give you a golden chance to benefit yourself from professionalized and personalized VAT services.
Contact us to consult about different types of accounting practices in the UAE and audit-related queries, as we will help you select the most suitable approach for your business.
Tax accountants get your all tax responsibilities done!