Accounting is accounting right? Wrong. There are different types of accounting that are handled by (sometimes) different people. But while the basis for the two are the same the finances of the company, the way they go about their jobs and the aspects that are important in each sector are very different.
What is Financial Reporting Accounting?
Sometimes the person who does this could be a bookkeeper. They are in charge of recording and reconciling the books for the company. This means that they are to look over the bank accounts, keep everything organized and ensure that the financial statements are up to date for the higher ups. Bookkeepers in this position can also be integral in the determination of where money can be cut from. Imagine, they are the people dealing directly with the bills, they can also find ways to help save and bring the proposal to the boss.
What is Tax Accounting?
Tax accounting focuses on the tax liabilities of the company and aren’t focused so much on the financial statements. They are rules by the IRS pretty much. This means that a tax accountant is the one who will review to determine what the liabilities are, if there is a potential refund or if they have to pay, and how they can help their tax situation to make it better. They generally use the financial statements that have been prepared by the bookkeeper and formulate their tax reviews based on that information.
What is the difference Between the Two
The difference between the two are the rules that they follow. For bookkeepers, their accounting methods must comply with the Generally Accepted Accounting practices (GAAP). These rules are in place so that if another person is reviewing the books, there are standards that have been followed across the board and they are uniform, so everyone understands them. It’s like giving every company the same spreadsheet and shorthand to use, it makes it easier to review.
There is also the Internal Revenue Code which is the tax codes. These are important because generally, the financial statements and the stateme4tns for tax purposes can provide different results. The reason behind this, imagine use of product or tax liability. When you file your taxes you want deductions (so you get more back or reduce your responsibility to pay). The same goes for a business and numbers, depreciation, inventory, etc. are all looked at a bit differently.
Generally in a business you will want one person for each position, or just hire a tax professional at the end of the year (or have them on retainer, up to you). Each person is going to look at your financial situation in a different way in order to give you, the business holder, the most accurate representation of your business financially and for tax purposes.