4. Types of Accounting
The term “accounting” encompasses many different types of accounting based on the group or groups served.
Private or Industrial Accounting. Accounting activity confined to a single firm is called private or industrial accounting. A private accountant makes his skills and services available to a single employer-employee basis. Where the employer-employee basis exists, the accounting service and the accountant are termed private, even though the employer is a public corporation.
Public Accounting. Accounting service offered to the general public by a public accountant is called public accounting. An accountant is said to be public rather than private when there is a practitioner-client relationship. Public accounting usually is considered to be more professional than private accounting, and the public accounting done by a certified public accountant (CPA) in considered to be of the highest professional caliber.
Public accounting services are provided by concertified as well as certified accountants, by single practitioners, and by partnerships ranging in size from two to many hundreds of members. The firms may be local, national, or international in scope. Firms that are international in scope, howeveri also are referred to as “national.”
Governmental Accounting. Accounting for a branch or unit of government at any level, such as federal, state, or local, is called governmental accounting. The object of the government units in to provide services rather than to make profits. Governmental accounting has much in common with conventional accounting methods: both use the double-entry system of accounting; both use journals and ledgers. Because the profit motive is absent in typical government units and hence is not available as a means of measuring efficiency, other controls must be developed. Thus, special fund accounting is used in order to enhance control. Some divisons or agencies tend to adopt conventional accounting methods, especially for cost determination purposes. Just as a business entity may use the services of both private and public accountants, som ay a governmental unit.
Fiduciary Accounting. Fiduciary has been defined as a position of trust or confidence. Fiduciary accounting therefore is the keeping of records and the preparation of reports by a trustee, adminstrator, executor, or anyone in a position of trust. This may be done by authorization of, or under the jurisdiction of, a court of law. It is necessary for a fiduciary accountant to seek out and to control all property subject to the estate or trust. The laws of the particular state having jurisdiction must be followed. The courts havingof estates and trusts are referred to in various states as orphan’s court’s, probate courts, or surrogate’s courts. In fiduciary accounting, the concept of proprietorship that is common in the usual types of accounting is absent or greatly modified. The proprietary function is replaced by authority and responsibility delegated to a third party.
National Income Accounting. What is known as either national income accounting or social accounting is a special type using an economic or social concept in establishing the accounting unit rather than the usual business entity concept. It provides an estimate of the nation’s annual purchasing power. A related term is “gross national product,” which covers the total market value of all production within the nation for a given period of time, usually a calendar year. Because of an increasing interest on the part of the United States government in the welfare of its citizens, the Department of Commerce has been preparing reports on national production since 1932.
Integrated data processing (IDP). IDP is a broad term cutting across many types of accounting business and economicactivities. It has come into prominence because of the widespread use of electronic computers that collect, analyze, and disseminate great masses of information in an amazingly short time. Although electronic computers are used by scientists, engineers, economists, and others, as well as by Accountants, a discussion of accounting requires some mention of electronic computers. The term “electronic data processing” (EDP) refers to the act of processing data by electronic computers. Thus EDP is similar to, althoungh not identical with, IDP. Most of the integration of large amounts of data is now being done electronically.
