When it comes to the profession of accountancy, most people think that you just need to be very good with numbers in order to be an accountant. In reality, you would need to undergo and learn a number of things before you can actually qualify to be an accountant.
One of the things that a would-be accountant would need to know is the different accounting areas. Each of this area has their own concepts and theories. These areas are basic accounting or bookkeeping, financial accounting, cost accounting, managerial accounting, auditing, government accounting, and tax accounting.
What makes one area different from the rest?
Basic Accounting is all about the routine functions involved in accounting – recording, classifying, and summarizing. On the other hand, Financial Accounting is involved in the preparation and interpretation of financial statements for the benefit of external users. Cost Accounting is all about the record-keeping, classification and summarization of all finances connected with the production and selling of a product or a service. The presentation of financial and non-financial information is known as Managerial Accounting while the examination and verification of all financial records is under the area of Auditing. Tax Accounting deals with the tax matters affecting business entities while government accounting, which uses fund accounting, is all about the use of public funds. Fund accounting is the same method used in accounting for non profit organizations.
Of all these areas, it is the government accounting, particularly the subsequent Fund Accounting method, which rarely gets public attention. If most of the methods, procedures and areas of Accounting deal with profitability, fund accounting deals with where the money went as opposed to the profit-centered ideals of commercial accounting. This is the reason why, when accounting for non profit organizations, one makes use of Fund Accounting. When one says non profit organization, however, this does not only mean religious groups. This could also include providers of health care services, colleges and universities, and voluntary health and wellness organizations.
As opposed to commercial accounting, accounting for non profit organization entails various net asset classes and different revenue classifications. All expenses are classified as unrestricted and are reported by function. Although these might seem as more complex, in reality, very few entities make use of the fund accounting system.
