What is Business Accounting?

Business accounting consists of operational accounting (book accounting) and tax accounting.

What is Operational Accounting?

Operational accounting accounts for the actual revenue and expenses to the business. Accounting for payroll or payroll accounting is a party of operational accounting

What is Tax Accounting? 

Tax accounting also accounts for revenue and expenses, but incorporates considerations for tax deferrals and write-offs. 

Restated, book accounting maintains the actual book or market value of assets; while tax accounting would focus on the tax value of the asset given the relevant stage of depreciation. 

The primary differences in book and tax accounting arises through the use of 

1. cash-based and accrual-based accounting methods; 
2. depreciation valuation (straight-line or accelerated) and actual valuation; and 
3. the treatment of inventory (LIFO vs FIFO) for valuation of assets and income recognition. 

These issues are covered in greater depth in our Accounting Resources Library.

Financial Accounting vs Managerial Accounting

Financial accounts accounts for all aspects of business operations that are represented in the primary financial statements. 

Managerial accounting concerns the use of company information (assembled as part of the financial accounting process) in decision-making and planning. 

Accounting Documents

The financial status of the business is documented or recorded in the form of financial statements. Below is an overview of the main financial statements: Balance Sheet, Income, Statement, and Statement of Owners Equity.