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There are several types of accounting that range from auditing to the
preparation of tax returns. Accountants tend to specialize in one of these
fields, which leads to the different career tracks noted below:
forensic accountant. Those in this field are more likely to be involved in the
insurance industry, legal support, or within a specialty practice of an audit
firm.
Management accounting. This field is concerned with the process of
accumulating accounting information for internal operational reporting. It
includes such areas as cost accounting and target costing. A career track in
this area can eventually lead to the controller position, or can diverge into a
number of specialty positions, such as cost accountant, billing clerk,
payables clerk, and payroll clerk.
Tax accounting. This field is concerned with the proper compliance with
tax regulations, tax filings, and tax planning to reduce a company's tax
burden in the future. There are multiple tax specialties, tracking toward the
tax manager position.
Internal auditing. This field is concerned with the examination of a
company's systems and transactions to spot control weaknesses, fraud,
waste, and mismanagement, and the reporting of these findings to
management. The career track progresses from various internal auditor
positions to the manager of internal audit. There are specialties available,
such as the information systems auditor and the environmental auditor.
There are mainly three type of accounts in accounting: Real, Personal and
Nominal accounts, personal accounts are classified under three
subcategories: Artificial, Natural and Representative. If you fail to identify an
account correctly as either a real, personal or nominal, in most cases, you
will get the journal entries incorrect.
1. Real Accounts
All assets of a firm, which are tangible or intangible, fall under the category
Real Accounts.
Tangible real accounts are related to things that can be touched and felt
physically. A few examples of tangible real accounts are building, machinery,
stock, land, etc.
Intangible real accounts are related to things that cant be touched and felt
physically. A few examples of such real accounts are goodwill, patents,
trademarks, etc.
Example
The transaction below shows the interaction of two different real accounts:
one is furniture and the other is cash, both of them are assets of the
company and hence classified as real accounts.
Accounts Involved
Furniture A/C
To Cash A/C
Debit/Credit
Rule Applied
Debit
Credit
2. Personal Accounts
Example
Accounts Involved
Debit/Credit
Debit
To Bank A/C
Credit
Rule Applied
3. Nominal Accounts
Accounts which are related to expenses, losses, incomes or gains are called
Nominal accounts. The dictionary meaning of the word nominal is existing
in name only and the meaning remains absolutely true in accounting sense
too, because nominal accounts do not really exist in physical form, but
behind every nominal account money is involved. E.g. Purchase A/C, Salary
A/C, Sales A/C, Commission received A/C, etc.
The final result of all nominal accounts is either profit or loss which is then
transferred to the capital account.
Example
Accounts Involved
Debit/Credit
Purchase A/C
Debit
To Cash A/C
Credit
Rule Applied
Journal
In accounting and bookkeeping, a journal is a record of financial transactions
in order by date. A journal is often defined as the book of original entry. The
definition was more appropriate when transactions were written in a journal
prior to manually posting them to the accounts in the general ledger or
subsidiary ledger. Manual systems usually had a variety of journals such as a
sales journal, purchases journal, cash receipts journal, cash disbursements
journal, and a general journal.
Ledger
A ledger is the principal book or computer file for recording and totaling
economic transactions measured in terms of a monetary unit of account by
account type, with debits and credits in separate columns and a beginning
monetary balance and ending monetary balance for each account.
Balance Sheet
A balance sheet is a financial statement that summarizes a company's
assets, liabilities and shareholders' equity at a specific point in time. These
three balance sheet segments give investors an idea as to what the
company owns and owes, as well as the amount invested by shareholders.
Income Statement
An income statement is a financial statement that reports a company's
financial performance over a specific accounting period. Financial
performance is assessed by giving a summary of how the business incurs its
revenues and expenses through both operating and non-operating activities.
It also shows the net profit or loss incurred over a specific accounting period.
S.E Statement
A financial statement that shows all of the changes to the various
stockholders' equity accounts during the same period(s) as the income
statement and statement of cash flows. It includes the amounts of
comprehensive income not reported on the income statement.
Trial balance
A trial balance is a list of all the general ledger accounts (both revenue and
capital) contained in the ledger of a business. This list will contain the name
of each nominal ledger account and the value of that nominal ledger
balance. Each nominal ledger account will hold either a debit balance or a
credit balance. The debit balance values will be listed in the debit column of
the trial balance and the credit value balance will be listed in the credit
column. The trading profit and loss statement and balance sheet and other
financial reports can then be produced using the ledger accounts listed on
the trial balance.