There is no standard set of “8 parts of accounting” universally recognized in the field. Accounting is typically broken down into core branches, cycles, and standards.
However, a practical way to view the comprehensive scope of accounting is by dividing it into four core branches and the four phases of the Bookkeeping Services in Jersey City, which together illustrate the full function of the profession.
Part 1: The 4 Core Branches (What Accountants Do)
These are the specialized areas that define the types of services accountants perform:
Financial Accounting: Focuses on creating standardized reports (financial statements) for external users (investors, creditors) according to strict rules like GAAP or IFRS. It primarily looks at past transactions.
Managerial Accounting (or Cost Accounting): Focuses on providing detailed, non-standardized reports and budgets for internal managers. Its purpose is to aid in planning, controlling operations, and making future strategic decisions.
Tax Accounting: Focuses on complying with tax law and minimizing tax liability. This involves calculating and reporting income to government agencies (like the IRS) using the specific regulations of the tax code, which often differ from financial accounting rules.
Auditing (or Assurance Services): Involves the independent examination of a company’s financial statements and internal controls. The goal is to provide an objective opinion on whether the statements are presented fairly and accurately.
Part 2: The 4 Phases of the Accounting Cycle (The Process)
The accounting cycle is the repetitive series of steps taken during an accounting period to process and record transactions, ending with the preparation of financial statements. These four phases represent the core, cyclical job of a bookkeeper or accountant:
Recording: The initial phase where business transactions are identified, analyzed, and formally entered into the company’s records. This includes creating journal entries.
Summarizing: The process of aggregating transaction data from the journal entries into the General Ledger (T-accounts) and preparing an initial Trial Balance to ensure the debits equal the credits.
Adjusting & Closing: At the end of the period, Accounting Services in Jersey City are adjusted for unrecorded items (like depreciation or accrued expenses) to ensure compliance with the Matching Principle. Temporary accounts (revenue and expenses) are then closed to ready them for the next period.
Reporting: The final and most important phase, where the summarized data is used to produce the formal financial statements: the Income Statement, the Balance Sheet, and the Cash Flow Statement.
