Accounting is an essential part of any finance department, and it requires the help of both accounting and financial professionals to create information that the public can easily understand. Companies must use three different types of accounting to track their revenues and expenses in the most efficient way. These include cost, managerial, and financial accounting, each of which we'll explore in more detail below. Real accounts, also known as general ledger accounts, refer to assets and liabilities other than individual accounts.
These accounts don't need to be closed at the end of the financial year as they are transferred to the following year. An example of a real account is a bank account. Personal accounts, on the other hand, are connected to individuals or entities such as firms or associations. A creditor account is an example of a personal account. Nominal accounts are general accounting accounts that keep track of all income and expenses, profits and losses.
An example of a nominal account is an interest account. Intangible real accounts and real tangible accounts are also types of personal accounts. For instance, when a company purchases a tangible item such as land, machinery, plants, buildings, etc., it is adding an asset to the business while simultaneously reducing its cash balance. The golden rule of real accounts states: “Debit what comes in, credit what comes out.” Small businesses need three types of accounting to provide financial information to different stakeholders. Tax accounting is used to determine a company's tax liability and report it to the federal and state governments using the correct tax forms. In larger small companies, there is usually a financial manager who receives accounting information and performs various types of financial analysis.
These range from simple analyses for small businesses to complex ones for large corporations. Nominal accounts are related to any form of income or expense, profit or loss. This type of accounting is often used in cases of fraud and embezzlement as it provides a detailed explanation of the nature and scope of a financial crime. Intangible real accounts refer to assets or possessions that are not physical in nature. While these are the most common types of accounting used by small businesses, they're not the only ones.
Here you'll find more information about each type of accounting and the role it plays in monitoring your company's finances. It's important to be familiar with all types of accounting so you can use them when necessary. With this guide, you'll have a better understanding of cost, managerial, financial, real, personal, nominal, intangible real, and real tangible accounting.
