A very common misconception when it comes to accounting is that one accountant fits all. Depending on accountant’s expertise, they handle different types of clients and accounts. There are many different types of accounting and accounts like equity accounts, bookkeeping accounts, tax accounts, private accounts, and income and expense accounts.
Before hiring an accountant, you should know what type of account you have, and what kind of accountant you need.
Asset and liabilities accounts
The balance sheet records the assets and liabilities your company owns which are listed in order of liquidity. Assets and liabilities make up the balance sheet. Increase assets with a debit and decrease them with a credit. Increase liabilities with a credit and decrease them with a debit. Assets are those things of value that your company owns. The cash in your bank account is an asset. So is the company car you drive. They are rights and claims owned by and having value for the firm. Think of liabilities as the opposite of assets. These are the obligations of one company to another. Accounts payable are liabilities.
This is the difference between assets and liabilities. These include revenue, expenses, dividend’s and owner’s capital. Most companies want to keep track of just where they get income and where it goes. Fees earned and sales are both examples of Revenue accounts. Expenses are incurred by a business during normal operations.
Tax accounts are something that everyone is familiar with. People are most familiar with this type of accounting as people associate accountants with taxes. Tax accountants are expected to be knowledgeable in financial and taxation laws. Tax accountants are able to provide sound financial advice and will be able to help you find tax deductions.
When an employment contract with a single company, private accounting plays a role. This is when it works in a pay roll and when working in a corporate finance.
Bookkeeping accounts help you in day to day transaction of your business. It includes financial analysis, task reporting, yearend tax projection and more.
Income and expense accounts
It increases or decreases the value of your accounts. Balance sheet accounts track the value of the things you own or owe; income and expense accounts allow you to change the value of these accounts.
Income is the payment you receive for the services you provide. Examples are commissions, tips, dividend income from stocks, and interest income from bank accounts. Income will always increase the value of your assets and thus your equity.
Expenses refer to money you spend to purchase goods or services provided by someone else. Examples of expenses are a rent, groceries, gas for your car, or tickets. Expenses will always decrease your equity.
Having knowledge about accounting concepts is important for any entrepreneur to run his business efficiently. Accounting will help you produce report for all your financial transactions. There are different accounting systems and models that can be used. It shows the financial position of your organization’s and its effectiveness. The accounting of your organization helps your stakeholders to know about your position and evaluate in decision making.