When a business wants to know its financial position, analyze its cash flow, determine the health of its operations, or understand its competition, it typically turns to certain branches of accounting. Small- to medium-sized businesses may use the services of one specialized accountants while big business and governments may work with an accounting firm that houses multiple finance departments to handle specific areas of accounting. Accounting branches use various types of analysis and data to inform management and help the business make knowledgeable, positive decisions for the company's present and future. In this article, we explain the different accounting branches and discuss their functions.

Accounting branches work to the measure, process and communicate financial and non-financial information that affects a business's economic interests and associations. Most businesses and corporations use accounting branches to measure the results of the organization's economic activity. Accounting branches use various methods to compile and report results to investors, creditors, management, regulators or tax collectors.

Because of the increase of global business and the expansion of tax laws and regulations, accounting evolved to expand its branches and develop specialties in a particular area of finance. Developments in technology and the exchange of international currencies result in the expansion of accounting specialties that place their focus on a particular economic interest.

Accounting branches record business events and transactions, then translate that information and present it to managers, stakeholders or whoever has a financial interest. The information assists managers before, during and after projects, and helps stakeholders make business decisions.

Accounting branches follow certain sets of accounting standards put in place by organizations such as the Financial Accounting Standards Board (FASB) in the US. These standards, known as the general accepted accounting principles (GAAP), are a set of concepts, conventions, assumptions and principles followed by accountants. GAAP serves to remove confusion and encourage uniformity and consistency in accounting practices.

Accounting branches use a variety of accounting practices to monitor and report on economic activity and company health.

In addition to tracking the movement of money, accounting branches typically serve to:

Those with a passion for numbers and a penchant for detail might enjoy a role in accounting. Accountants are methodical, organized and display careful attention to detail. Since there are several branches of accounting, you can combine a love for numbers while upholding tax laws, working for a non-profit or protecting interests or assets.

Some of the titles in accounting are:

Read more: Types of Accounting Degrees

The world of accounting expanded into several branches that specialize in particular legal areas, or focus on a certain aspect of business.

Here is a list of 12 branches of accounting along with a description of each area's focus:

Financial accounting involves recording and clarifying business transactions along with preparation and presentation of financial statements. Financial accounting follows GAAP principles and focuses on historical data. For example, a financial accountant may analyze the financial records of the previous quarter to make recommendations for changes in the next quarter. Financial accounting analyses the company's balance sheet and prepares profit and loss statements that advise management or stakeholders in regards to loans, investments, or acquisitions.

Financial accounting provides vital economic business information for:

Managerial accounting provides information to a company's internal structure, namely management. Unlike financial accounting, managerial accountants monitor the use of money, rather than amounts of money. Managerial accounting places the focus on the needs of management and doesn't necessarily follow GAAP accounting rules. The Chartered Institute of Management Accountants developed a set of accounting principles, known as Global Management Accounting Principles (GMAP) that relate directly to this discipline.

Managerial accounting works to improve the company's administration, enhance its profit, and provide management with financial reports that influence planning and budgets. This branch of accounting performs forecasting to advise management on the best business practices to meet goals and maintain profit. Managerial accounting includes conducting internal examinations through cost to volume profit (CVP) or break-even point (BEP) analysis, factors that affect decision making.

Cost accounting, considered a subset of management accounting, focuses on evaluating costs. This branch considers all factors of manufacturing to accurately determine the cost of a project or venture. Cost accounting analyzes manufacturing costs to prepare and present reports that inform decision makers on how to reduce cost, or when to spend more. It monitors projects for waste and cost control. Cost accounting regularly analyzes actual costs over budget to determine future monetary actions.

Auditing is a branch of accounting that is usually done internally and externally. Auditors examine and monitor a business for accurate reporting, compliance with tax laws and regulations, and financial integrity. There are two specializations for auditors:

State or federal auditing takes place with an independent, outside auditor who examines a company's financial statements for accuracy. Auditing complies with GAAP and evaluates the adequacies of a company's internal controls. External auditors may test the company's segregation of duties, policies, authorizations and other management controls for efficacy and integrity.

Internal auditing identifies and prevents tax issues or prepares the business for an outside audit. Auditors in this branch are typically chosen by shareholders so their role doesn't present a conflict of interest and ensures their objectivity.

Tax accounting follows state and federal tax rules during tax planning or in the preparation of tax returns. This branch reports on the effect of taxes on a business and may offer advisory services on minimizing taxes or the consequences of tax decisions. Tax accountants calculate income and other taxes depending on the structure of the business. Since taxes and income brackets vary from entity to entity, tax accounting is well-versed in tax laws surrounding sole proprietorships, corporations and limited liability corporations (LLC).

Fiduciary accounting handles the accounts entrusted to the person responsible for custody or management of property. The branch tracks and reports receipts and disbursements from accounts to ensure proper fund allocations and is frequently used by guardians or custodians.

Fiduciary accounting typically serves:

Some industries, such as construction or engineering, work on large projects that require a dedicated accountant. Project accounting falls under the project management umbrella. This accounting analyzes costs and prepares reports at regular intervals to track a project's financial progress. It provides historical data to inform future project decisions including cost-saving measures or budget adjustments.

Forensic accounting, also known as legal accounting, handles legal matters related to bankruptcy, fraud or mismanagement. This branch conducts investigations for court and litigation cases, calculates damages, and oversees dispute resolutions.

Forensic accounting serves:

Fund accounting works with non-profit organizations (NPO) to ensure the correct and accurate allocation of funds. Fund accountants ensure NPO funds go where intended through the separation and distribution of funds according to the company's policies or in accordance with laws governing NPOs.

Fund accounting is frequently used by:

Government accounting oversees and records state and federal fund allocation and disbursement. This can include aspects of social accounting and the measurement of cost to humans as it relates to federal land use, climate change or the use of welfare funds. Government accounting tracks the movement of money through various agencies and ensures budget requirements are kept or met. Government accountants work in state and federal programs such as healthcare, housing and education.

Political campaign accounting oversees the development and implementation of a political campaign's finance systems. This may include transaction accounting or donation monitoring to ensure compliance with federal and state laws governing political campaigns. Political campaign accounting is practiced in local, state or nationwide political races.

As global business expands, so do international markets and the need for international accounting. This branch of accounting serves to learn laws and regulations in other countries in order to conduct business honestly and fairly. International accountants not only follow GAAP, but are well-versed in International Financial Reporting Standards (IFRS), the accounting standard followed in most global economies.