What is Accounting?

Definition of Accounting

Accounting is the gathering, processing, and communication of financial information regarding business entities (companies, people, etc.). The people who do accounting are called accountants. There are many types of accounting. While all types of accounting involve gathering and processing financial information, there is a difference in how and who that information is communicated to.

Types of Accounting

Financial Accounting

That financial information is communicated to investors, creditors, and other private external users of the information. For example: if you go to Yahoo Finance and look up the balance sheet of Microsoft, a Financial Accountant is who prepared that balance sheet.

Managerial Accounting

The financial information is communicated to managers, executives, and other internal users of that information. For example: a CEO is trying to decide whether or not to discontinue a project, they would ask a Managerial Accounting to gather information on that project’s profitability in order to make an educated decision.

Tax Accounting

The financial information is communicated to the government in order for the correct amount of tax to be paid to the government by the business entity in question (corporation, person, etc.). For example: A Tax Accountant will look at all the money you’ve earned over the last year and all the money you spent (and what you spent it on), process that information into a particular format, and then they will send that information to the government. They will then tell you how much tax you owe to federal and to state.

Fee Structure

Rate Assets Under Management
1.44% Below $125,000
1.00% Between $125,000 and $750,000
.85% Between $750,000 and $1,250,000
.80% Between $1,250,000 and $1,750,000
.75% Between $1,750,000 and $2,500,000
.70% Between $2,500,000 and $3,250,000
.65% Between $3,250,000 and $4,250,000
.60% Above $4,250,000

A single rate is applied to the entire account. So a person with a $750,000.01 account pays less than a person with a $750,000 account. I will waive personal tax return fees for accounts over $1 million. For accounts that are above $5,250,000, we’ll need to discuss a custom rate. 

As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. Please contact me if you would like to submit a post to my blog.

If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.

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Questions for the comments

Did my explanation make sense? Do you agree or disagree with what I said?

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