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The Different Types of Accounting: Your Quick Explainer

A large part of running a business is running its finances. Here are the different ways to do it

What is Financial Accounting?

The purpose of financial accounting, also known as bookkeeping, is to track, record, and report on financial transactions by generating financial statements. These statements are then used to determine several things, like how your business is doing, how it's likely to do in the future, and how much tax it should be paying. 

 

Financial accounting provides an accurate look at business performance over a specified period and is often provided to outside stakeholders such as investors and financial institutions.

The Importance of Good Bookkeeping

Good bookkeeping isn't just about numbers and taxes; it's the bedrock of a healthy financial life. Imagine your finances as a house - strong, organised bookkeeping lays the foundation, ensuring everything runs smoothly. Bad bookkeeping means your business could stumble upon unexpected tax bills, struggle to make crucial decisions, or lose financial certainty. 

 

Good bookkeeping equips you with the power to make informed choices, plan for the future, and weather any financial storm your business may be forced to encounter. Remember to consider the importance of good bookkeeping; it's the key to building a solid financial future.

What Are the Different Types of Accounting?

There are several types of financial accounting, each with a different purpose. Business valuation accounting, for example, aims to gain an understanding of how much a business is worth, while tax accounting helps businesses determine how much tax they owe. 

 

Financial accounting ensures transparency and accuracy in reporting your company's financial health. A financial report should paint a clear picture of your business's financial performance from the balance sheet to the income statement.

 

Though most types of financial accounting concern the past performance of your business, it can sometimes be used to make predictions. Management accounting revolves around using financial data to inform strategic decisions within a company; analysing costs, performance, and budgets to help your organisation use its resources most effectively. Similarly, cost accounting delves into the granular details of expenses, analysing the costs associated with the products and services you provide.  

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Our Partners
  • Brookson Group Ltd
  • Clever Accounts Limited
  • Contrast (Accrue) Accounting limited
  • Sadler & Frost LTD
  • SKS Business Services Limited
  • Unbiased Limited
Our Products
  • Business Accountancy
  • Business Epos Systems
  • Business Telephone Systems
  • Commercial Waste Collection
  • Digital Marketing
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Accounting Solutions for Your Business

There's a range of solutions available for businesses that want to get a firm grip on their business accounts; from accounting software to outsourced accounting, there are options available to businesses like yours. 

Accounting Software

Accounting software is widely used by businesses to manage their finances. They are sophisticated computer programs that crunch all the numbers so you don't have to. Tasks like account reconciliation and report generation can be done automatically, making your life easier. 

 

If you're unsure about how to tackle your business's finances, getting some accounting software could be the answer to your business's long-term financial health. 

Outsourced Accounting

Outsourcing your accounting is different to using accounting software. Outsourced accounting is the delegation of your financial functions to a third-party provider. The accounting firm you choose takes responsibility for managing your bookkeeping, payroll, tax compliance, and financial reporting. 

 

It works by handing over the financial management of your business to a team of experts, offloading many of your bookkeeping burdens. Outsourcing your accounting also allows you to access a wide pool of accounting expertise; something your business would otherwise struggle to benefit from. 

 

Moreover, accounting firms already use cutting-edge software and technology, so you don't have to worry about learning to use it yourself. Additionally, the firm that does your accounting will be able to provide valuable insights into your business and identify trends and opportunities for improved financial performance. 

Get an Accountant for Your Business Today

If you think the best method for your business to handle its finances is outsourcing, then you're not alone. Many businesses across the country outsource their accounts and have great success in doing so.

 

If you think your business could benefit from outsourcing your accounting, then you're in the right place. Just tap the button below and answer a few questions about your business to get a range of free quotes tailored to your specific business needs.

FAQs

Your Questions Answered

Financial accounting, also known as bookkeeping, is the tracking, recording, and reporting of financial transactions by generating financial statements. These statements are then used to determine several things, like how your business is doing, how it's likely to do in the future, and how much tax it should be paying. 

Outsourced accounting is the delegation of your financial functions to a third-party provider. The accounting firm you choose takes responsibility for managing your bookkeeping, payroll, tax compliance, and financial reporting. With these tasks outsourced, you become free to focus your efforts on other, more important, business objectives. 

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April 2024 Newsletter

UK Inflation Fell to 2.3%The end of May saw the latest inflation data released by the Office for National Statistics. The new data shows UK inflation fell to 2.3% in the year to April - which marks a sharp fall from 3.2% in March according to the Office for National Statistics.That's the lowest level in almost three years, a fact that will be welcomed by business owners across the UK as it means that their costs are rising less quickly.  More good news: The Bank of England also said it expects inflation to reach 2% "in the coming months" but predicts it will be 2.5% by the end of the year. The BBC reported that the fall in inflation can largely be attributed to the drop in energy prices, which were lowered by the new energy price cap. However, it's important to remember that today's inflation figures do not decisively point to an interest rate cut in June.Interest Rates Held for Sixth Consecutive TimeWhile the latest inflation figures brought a bit of sunshine into the nation's mood, May also saw interest rates held, for a sixth consecutive time, at 5.25%. The hold means interest rates remain at a record high, and continue to ensure the cost of borrowing remains high for both businesses and consumers.  Talking about the hold, Andrew Bailey, the Bank of England boss, said he was "optimistic that things are moving in the right direction" but that he wanted to see more evidence that things are continuing in the right direction.   However, Mr Bailey said that the Bank is likely to cut bank rates over the coming month. Many businesses will be hoping that a cut in the base interest rate will come sooner, rather than later. Food price rises are 'returning to normal'The BBC reported that food prices are returning to "more normal" rates after a period of significant increase. The slow return to more normal rates should mean that the general rate of inflation should reflect something similar in the near future - though many shoppers are still seeking cheaper options.  Research firm Kantar revealed grocery price inflation to have fallen to 2.4% - an announcement that came ahead of the figures you've read about above, which raised expectations and hopes for more affordable food this summer. General Election Announced  In case you missed it, there's going to be a general election on 4th July 2024. For businesses, their choice could hang largely on what each party offers for their company.  This newsletter isn't here to provide political commentary, and we won't be choosing sides. We recommend you keep an eye on what each party offers you and your business. You'll be seeing a lot in the news, and we'll be here with the highlights every month.  Royal Mail Agreed to a £5bn TakeoverThe owners of Royal Mail, which has faced scrutiny recently, formally agreed to a formal takeover offer from Daniel Kretinsky, a Czech billionaire.  The 500-year-old organisation, which employs more than 150,000 people, has agreed on a £5bn sale, a deal which includes assumed debts. Mr Kretinsky said he had the "utmost respect" for Royal Mail's history and tradition. The offer includes commitments to retain the Royal Mail name, brand, and UK headquarters, as well as protections for employee benefits and pensions. There are, however, some doubts as to whether the sale will go through as the Business Secretary Kemi Badenoch is yet to meet Mr Kretinsky and he has the power to scrutinise and potentially block the deal. If your last offer wasn't what you were looking for, don't worry. Doing another application could result in a more suitable offer so, if you're still looking for an extra cash boost, click below to find a deal for you. 

Benefits of Outsourcing Your Accountancy

Outsourcing your accounting can offer numerous benefits for businesses of all sizes. It involves paying an external accounting firm that specialises in doing the accounting on behalf of businesses like yours.  This means that you don't have to hire an internal accountant as a permanent staff member. Small businesses on a tighter budget often find that outsourcing their accounting services can prove particularly helpful, as it saves money in the long run. Benefits of Using Outsourced AccountantsWhen compared to the cost of maintaining an in-house accounting team, outsourcing your accountancy can significantly reduce expenses within your business. You'll avoid the costs associated with hiring and training a permanent member of staff, you'll also save on the costs of office space, equipment, and software. The expertise provided by accounting firms is often difficult or expensive to find in-house, especially for smaller businesses. Additionally, the firm you choose can scale its resources up or down based on your business's needs. This ensures your business has access to support as and when it needs it. Outsourcing accounting tasks also relieves your business of the burden of managing payroll, handling invoices, preparing financial statements, and staying up-to-date with tax regulations. All of this is handled by the accounting firm you choose, so time is freed up and you and your staff can focus on other things. How to Choose an Accounting Firm for Your BusinessIf you do want to outsource your business's accountancy, there are a few things you should consider when choosing a firm. The firm should be able to make informed decisions on your behalf and be comfortable with the complexities of your specific industry.  Chiefly, you should be looking for security. One of the things that puts people off using an outsourced accountant is the security risk posed by providing an accountant with sensitive financial data. These concerns are justified; you should take data protection seriously as you need to do so to avoid problems within your business. This is why using an accounting firm with a proven record of good security is important.  If you're looking for an external accountant to save money on hiring a full-time member of staff, then the cost of the accountant you use will be a factor in your decision-making. Take time to understand what your business needs and make your decision carefully. Outsource Your Accounts TodayOutsourcing can save a lot of time and resources for your business and also offer an easy way of relieving the strain that bookkeeping can put on smaller businesses. As a result, many businesses opt for outsourcing.  Picking the right accountant for you might seem difficult, but it doesn't have to be. Answer the question below, then a few more quick questions about your business, and you'll get a range of free quotes tailored to your specific business needs.

April 2024 Newsletter

UK Inflation Fell to 2.3%The end of May saw the latest inflation data released by the Office for National Statistics. The new data shows UK inflation fell to 2.3% in the year to April - which marks a sharp fall from 3.2% in March according to the Office for National Statistics.That's the lowest level in almost three years, a fact that will be welcomed by business owners across the UK as it means that their costs are rising less quickly.  More good news: The Bank of England also said it expects inflation to reach 2% "in the coming months" but predicts it will be 2.5% by the end of the year. The BBC reported that the fall in inflation can largely be attributed to the drop in energy prices, which were lowered by the new energy price cap. However, it's important to remember that today's inflation figures do not decisively point to an interest rate cut in June.Interest Rates Held for Sixth Consecutive TimeWhile the latest inflation figures brought a bit of sunshine into the nation's mood, May also saw interest rates held, for a sixth consecutive time, at 5.25%. The hold means interest rates remain at a record high, and continue to ensure the cost of borrowing remains high for both businesses and consumers.  Talking about the hold, Andrew Bailey, the Bank of England boss, said he was "optimistic that things are moving in the right direction" but that he wanted to see more evidence that things are continuing in the right direction.   However, Mr Bailey said that the Bank is likely to cut bank rates over the coming month. Many businesses will be hoping that a cut in the base interest rate will come sooner, rather than later. Food price rises are 'returning to normal'The BBC reported that food prices are returning to "more normal" rates after a period of significant increase. The slow return to more normal rates should mean that the general rate of inflation should reflect something similar in the near future - though many shoppers are still seeking cheaper options.  Research firm Kantar revealed grocery price inflation to have fallen to 2.4% - an announcement that came ahead of the figures you've read about above, which raised expectations and hopes for more affordable food this summer. General Election Announced  In case you missed it, there's going to be a general election on 4th July 2024. For businesses, their choice could hang largely on what each party offers for their company.  This newsletter isn't here to provide political commentary, and we won't be choosing sides. We recommend you keep an eye on what each party offers you and your business. You'll be seeing a lot in the news, and we'll be here with the highlights every month.  Royal Mail Agreed to a £5bn TakeoverThe owners of Royal Mail, which has faced scrutiny recently, formally agreed to a formal takeover offer from Daniel Kretinsky, a Czech billionaire.  The 500-year-old organisation, which employs more than 150,000 people, has agreed on a £5bn sale, a deal which includes assumed debts. Mr Kretinsky said he had the "utmost respect" for Royal Mail's history and tradition. The offer includes commitments to retain the Royal Mail name, brand, and UK headquarters, as well as protections for employee benefits and pensions. There are, however, some doubts as to whether the sale will go through as the Business Secretary Kemi Badenoch is yet to meet Mr Kretinsky and he has the power to scrutinise and potentially block the deal. If your last offer wasn't what you were looking for, don't worry. Doing another application could result in a more suitable offer so, if you're still looking for an extra cash boost, click below to find a deal for you.