Types of accounting: their specific features and obligations

We usually talk about accounting 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 at a loss to know 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!

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

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General accounting or financial accounting

General accounting is used to keep the accounts of a company or organisation, recording all activity in chronological order.

It is compulsory, except for micro-businesses, and provides information on the financial health of the company and the value of its assets, by producing a number of accounting documents:

• the profit and loss account 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 accounts provide useful information for understanding the income statement and balance sheet.

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

💡 It is important to note at this stage that accounting is based on several major principles, in particular: the going concern principle, the principle of independence of financial years and the principle of prudence.

Cost accounting or management accounting

What is the difference between general accounting and management accounting?

While general accounting gives an overview of a company's accounts, management accounting proposes to analyse 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
• a project or an activity,
• of the value of stocks (with the margin on variable costs, for example).

The aim is to

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

It can take various forms, such as forecasting dashboards, a cash flow statement or an intermediate management balance ( IMB) 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 traders under the non-commercial profits (BNC) regime, and for certain companies under the BIC regime (industrial and commercial profits). It is easy to manage and less time-consuming than accrual accounting, and therefore less costly.

🛠 Georges the accounting robot is designed for the self-employed under the BNC scheme. It synchronises with the bank account and automatically records income and expenditure.

Commitment accounting

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

This requires regular bank reconciliations to check that the financial flows actually correspond to the commitment accounting entries. It provides a much more accurate representation of results and assets, and ensures accurate monitoring of debt recovery.

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

Budget accounting

The purpose of budget accounting is to define budgets for the coming years. It focuses solely on previously validated budget expenditure and revenue for a given financial year. 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 a clear picture of any variances from the forecast, and enables adjustments to be made for future forecasts.

Sage 100 c Accounting lets you manage and optimise your SME's accounting, control your costs and manage your resources thanks to a budget management function.

Public accounting

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

It is used to determine the public budget after having communicated its commitments. It can then be used to check whether the expenditure budgeted for corresponds to the amount forecast. In the end, the difference between revenue, i.e. the various taxes collected, and expenditure will determine whether the organisation 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 are applied differently depending on the legal status of your company and its size.

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