6 Types of Accounting Your Business May Need

Accounting is a field of complex nuances that make it hard to understand and even harder to get right. And with so many types of accounting systems to manage, inexperienced business owners make mistakes that can result in compliance failure, audits, missed deductibles, decreased profits—and scary legal ramifications.

That’s why it’s important for businesses to familiarize themselves with the main branches of accounting, and only trust their financial well-being to experienced accounting experts.

But you have a business to run and don’t have all the time it would take to master this financial minefield. That’s why you need expert CPAs (like those at Smith Jeffries) who can help you maintain accurate financial records, take advantage of every possible deduction, avoid errors that trigger audits, and help you maximize profits.

Accounting For Every Business Season.

Accurate accounting is crucial for every business. But what most people don’t know that the term ”accounting” encompasses a vast sea of specializations and skillsets.

There are more than just six types of accounting. However, these are the ones we believe could be most useful, if not critical, to every business because they can impact it in different ways. Each must be handled with the utmost proficiency to protect against audits and non-compliance.

Cost Accounting

Summary: The process of recording, reviewing, and managing manufacturing costs.




Cost Accounting examines variable and fixed accounting expenses (like maintenance, labor, and overhead), and helps businesses see if the costs to operate their business yield a profit.




For example, Cost Accounting can help your business identify if upgrading a new piece of machinery has increased profits, or turned into an unworthy added expense.




Financial Accounting

Summary: Keeping and filing accurate financial documentation that is used for external reporting and revenue generation.




This type of accounting involves the intensive process of organizing and filing financial documentation that will be used for external reporting. Financial Accounting assists businesses with revenue generation strategies while ensuring a business’s financial records are accurately maintained and compiled into a ledger.




Note: Sometimes referred to as a “GL” (General Ledger), a financial accounting ledger describes a unified record that tracks business transactions like accounts receivable, cash receipts, investments, etc. The ledger is where your accountant stores (posts) all financial transactions (credits and debits) related to your business.




The biggest priority for a financial accountant (in the US) is maintaining compliance under GAAP (Generally Accepted Accounting Principles). Failing to follow the strict guidelines of GAAP can trigger IRS audits—which is why a highly experienced accounting firm (like Smith Jeffries) is critical for stress-free financial health.




Forensic Accounting

Summary: A type of accounting that figures out where missing money has gone by recreating financial records when data is unaccounted for.




An alarming statistic from the 2021 Experian Global Fraud and Identity Report revealed that—based on conservative estimates: a minimum of $36 billion out of $360 billion in the US CARES Act unemployment benefits was lost mostly because of fraudulent claims.




Forensic Accounting is the specialization that helps mitigate those losses by recreating a detailed financial paper trail when some or most of the financial information/data is missing.




Banks, law enforcement, and attornies rely on this type of accounting to build a complete picture of someone’s financial history—or uncover criminal activities. Forensic Accountants can even be asked to appear in court proceedings for cases like embezzlement, money laundering, or fraud to testify on the reports they make.




More often than not, this is a uniquely specialized service that most other accountants don’t offer. However, its incredible blend of numerical, auditing and investigatory elements makes Forensic Accounting an invaluable asset when a complete financial picture is necessary.




Managerial Accounting

Summary: Managerial accounting helps businesses make informed decisions regarding “what if” scenarios, ensuring the organization has the best chance of maximizing profit potential.




In simple terms, Managerial Accounting helps businesses make decisions based on how they operate internally. This type of accounting system creates records used primarily by stakeholders, allowing them to assess the potential outcomes of growth efforts.




It takes into account things like margins and product costs, helping businesses answer many “what would happen if” questions around raising or lowering prices, upgrading equipment, expanding their workforce, adopting a remote or hybrid work strategy, and so on.




Managerial Accounting provides businesses with the invaluable opportunity to examine the pros and cons of their decisions, allowing them to develop effective short-term and long-term strategies that help increase profits and avoid unnecessary losses.




Project Accounting

Summary: Project accounting is the practice of tracking costs and financial benefits associated with a project, allowing businesses to assess the financial implications of planning and completing them.




By using project-based accounting, one can determine if the costs—materials, time, special equipment—are worth the outcome or financial benefit it yields. It is a valuable practice for effective project management by providing a detailed view of project financials at various points throughout the lifecycle.




Budget forecasting, resource allocation costs, expense comparisons, and identifying the key financial metrics that are relevant to the project are all factors that go into project-based accounting.




Tax Accounting

Summary: The process of ensuring an organization stays compliant with IRS guidelines and finds every legal tax deduction possible.




This accounting type focuses entirely on ensuring organizations (for-profit or non-profit) comply with the IRS’s evolving US tax codes.




While staying compliant can be complicated and nerve-racking for organizations and individuals alike, highly-trained CPA experts know how to make your business audit-proof and help you capitalize on every deduction.




Note: Optimizing an accurate Tax Accounting process is especially important for those running cannabis-based businesses, as misunderstanding Tax Code 280E and IRC 471 can lead to an audit.

Don’t leave your financial future to guesswork

When it comes to maintaining accurate procedures no matter what type of accounting your business needs, as well as feeling confident that your financial health is always at its best, experts (like Smith Jeffries) are here to help.

Our decades of multi-industry experience allow us to manage your bookkeeping and make your business practically audit-proof.

But even if you do encounter an audit, we can help with that, too—ensuring you don’t suffer unnecessary financial loss or stress while making sure you make the most money possible.

Disclaimer: This article is not, nor should be, considered legal, tax, or business advice of any kind. Always consult with experts (like Smith Jeffries) regarding any and all matters having to do with the financial future of your business.