Types of accounting: their specific features and obligations

Accounting is usually used in a general sense, but in reality it encompasses all the different types of accounting that exist.

General accounting, cost accounting, cash accounting, commitment accounting, budget accounting and public accounting all have their own specific features and uses.

As a business owner, are you a little confused about which type of accounting to use, and what your obligations are?

Here ' s an overview of the different types of accounting, a comparison table to help you see things more clearly, and some software to help you along the way!

💡If you'd like to find out more about the definition and role of accounting, take a look at our article on the subject.

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General or financial accounting

General accounting keeps the accounts of a company or organization, recording all activity in chronological order.

Compulsory, except for micro-businesses, it enables you to assess your financial health and the value of your assets, by producing a number of accounting documents:

• the income statement lists the company's income and expenses,
• the balance sheet lists the company's assets (what it owns) and liabilities (what it owes),
• the notes to the financial statements provide useful information for understanding the income statement and balance sheet.

These documents are essential for communicating the company's financial situation to (potential or actual) investors, suppliers, banks, customers, and to the State for calculating the tax base.

💡It's important to note at this point that accounting is based on several major principles, including: the going concern principle, the principle of independence of financial periods, and the principle of prudence.

Cost accounting or management accounting

What's the difference between general accounting and management accounting?

While general accounting gives an overview of a company's accounts, management accounting proposes to analyze and interpret them, in order to facilitate decision-making. Its aim is to break down the costs inherent in each value creation process, by calculating the profitability of :

• a product,
• project or activity,
• the value of inventories (with margin on variable costs, for example).

The aim is manifold:

• identify what causes losses and what generates profit,
• identify growth levers and areas for optimization,
• implement an action plan to reduce the gap with forecasts, and increase overall profitability.

It can take various forms, such as forecasting dashboards, a cash flow statement or a MIS (intermediate management balances) table.

🛠 Software such as Itool Comptabilité automatically calculates these indicators and presents them in the form of visual dashboards to facilitate decision-making.

Cash accounting

Cash accounting records a company's incoming and outgoing financial flows. It creates an accounting entry for each cash inflow and outflow, based on bank account activity.

It is reserved for sole proprietorships under the non-commercial profits (BNC) regime, and for certain companies under the industrial and commercial profits (BIC) regime. It's easy to manage and less time-consuming than accrual accounting, and therefore less costly.

🛠 Georges the accounting robot is designed for BNC self-employed workers. It synchronizes with the bank account and automatically records income and expenses.

Commitment accounting

Commitment accounting records the company's receivables and payables at the time the commitment is made, without them yet being materialized by financial flows. This may be the case, for example, when an invoice is issued or received.

This requires regular bank reconciliations, to check that the financial flows match the commitment accounting entries. It gives a much more accurate representation of earnings and assets, and ensures accurate monitoring of receivables collection.

🛠 Sinao lets you carry out bank reconciliations in just a few clicks, thanks to automatic detection of movements on your bank account.

Budgetary accounting

The mission of budget accounting is to define budgets for the coming years. It focuses solely on previously validated budget expenditure and revenue for a given accounting period. It does not take into account :

• assets and liabilities,
• debts and receivables.

It is not compulsory, but is often used as a company management and budget control tool. In particular, it provides visibility on variances with the forecast, and enables adjustments to be made for future forecasts.

🛠 Sage 100 c accounting lets you manage and optimize your SME's accounting, control your costs and pilot your resources thanks to a budget management feature.

Public accounting

Public accounting is the type of bookkeeping used by local authorities and public administrations to account for expenditure and revenue. It is based on the same principles as those set out in the general chart of accounts, such as general private accounting, double-entry bookkeeping and depreciation.

It enables the public budget to be determined, once commitments have been communicated. It is then used to check whether budgeted expenditure corresponds to the amount forecast. In the end, the difference between revenue - i.e. the various taxes collected - and expenditure will determine whether the organization has a budget surplus or deficit.

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Comparative table of different types of accounting

As we have just seen, there is not just one type of accounting, but several. These types of accounting vary and apply differently depending on your company's legal status and size.

If you'd like to find out about all the accounting requirements that apply to your company, please consult our special section.