This paper outlines the basics of four key accounting principles: bookkeeping, financial accounting, managerial accounting, and tax accounting, highlighting their interconnected roles within an organization. Each principle builds upon the previous one, contributing to the overall financial health and strategic goals of the organization, with varying educational and professional requirements. The conclusion emphasizes that these accounting practices work collectively to promote an organization's financial success and future forecasting.

1. Running
head:
ACCOUNTING
PRACTICES
Accounting
Principles
Kimberly
King-­‐Martin
Pacific
Oaks
College

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PRACTICES
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Abstract
This paper will discuss the basics of four different accounting principles: Bookkeeping,
Financial Accounting, Managerial Accounting, and Tax Accounting. This discussion will
show the tiered cycle of accounting with in an organization. This translates to the way
each principle builds off the previous and supports the next tier all while cycling back
again. This paper will also state the basics in the function of each principle and the roles
needed to execute their success.

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Accounting Practices
Accounting principles are performed and examined by individuals or teams that
handle all relevant financial reporting within an organization. There are tiers regarding
the role and responsibility that one has in
accounting practices. This paper will
discuss each of these tiers and the
responsibilities that apply to each.
Although, seemingly separate, all of these
accounting practices work together to
manage the business needs for today and
ensure an organization’s future success (see graph).
Bookkeeping
According to the United States Bureau of Labor Statistics (2015), the role of
bookkeeping requires maintaining the general ledger of an organization. An individual in
the bookkeeping role is referred to as the bookkeeper. In this role one is responsible for
recording all debits and credits that an organization incurs. This role usually involves
verifying receipts to keep track of overdue accounts. Also, it encourages production of
invoices and bank deposits that reflect basic financial standing. To communicate the
basic financial health of an organization, bookkeeping obliges an individual to create the
financial statements needed and prepare reports for supervisors and managers. In it’s
simplest description it is cash flow management.
Author Scot (2010) notes that, “bookkeeping has become an antiquated term
because it implies by definition that a physical set of books are being maintained” (p. 53).
Bookkeeping
Financial
Accounting
Managerial
Accounting
Tax
Accounting

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PRACTICES
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Technology has changed the literal meaning of the role. This title is most used within
smaller organizations and not-for-profits more than larger corporate institutions. The role
does not require much or any formal education and/or professional experience. Usually, it
is seen as an entry-level position within accounting practices’ roles.
Financial Accounting
Financial Accounting keeps track of the financial transactions beyond basic
bookkeeping practices. This particular practice emphasizes money to gage economic
performance rather than as a factor of production. An individual or teams of people that
have at least a bachelor’s degree mostly fill this role. One may also pursue a certificate to
further their career. “For example, many accountants become a Certified Public
Accountants (CPAs)” states the United States Bureau of Labor Statistics (2015).
Focused on balance sheet and income statement to report fiscal tracking for an
organization. The main purpose of this accounting practice is to assess the value of the
organization. The financial accounting tier is an important entity regarding the realistic
numbers, financial health. Another important responsibility of financial accounting is to
report to external parties, such as, investors, shareholders, and any other party of
investment. Working closely with managerial accounting, financial accounting enables
managers to take fiscal reports and strategize for future success.
Managerial Accounting
Managerial accounting is used to analyze and interpret financial statements and
operational reports that are provided through the financial reporters. Also known as Cost
Accounting, it used to factor internal production for management to make decisions. This
tier is responsible for strategizing future market and operational costs. In turn, executives

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such as Chief Operational Officers (COO), Chief Financial Officers (CFO), and Chief
Executive Officers (CEO) usually hold positions in managerial accounting. A higher
level of both education and professional experience are required to enable managerial
accounting’s success. The analysis and strategy can be a culmination of many factors
such as the positive and negative effects of business growth in relation to the stock
market.
Scapens (2006) research of the evolution of managerial accounting for the last 35
years finds that the latest trends include “a variety of research methods… including
surveys, fieldwork, and case studies… quantitative work and also some analytical work”
(p.8). Most importantly these methods are used to enable indispensible communication
between the managerial and financial accounting departments within an organization.
Scapens (2006) has found that old management accounting practices tended to be
stagnant in a general treatment that applied to most organizations. Now he finds that
organizations are becoming more fluid in terms of considering the “wider social and
ethical issues” (p. 12) that can affect the organizations growth strategy and success.
Tax Accounting
Tax accounting is an accounting practice that involves an organization’s relevant
tax information rather than financial forecasts. Tax accounting is regulated by the United
States Internal Revenue Service (IRS) and governed by the U.S. Code: Title 26 - Internal
Revenue Code (IRC). This requires knowledge and/or understanding of United States
Tax Law. In cases of an organization that has entities overseas it may be necessary to also
have knowledge and/or understanding of International Tax Laws. Due to the complex
nature of tax accounting a bachelor’s degree or graduate degree in accounting is essential

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to this principle. An individual in this role is generally a Certified Financial Planner
(CFP) and Certified Public Accountant (CPA).
Tax accounting principles involve many if not all aspects of a business including
labor, revenues, investments, insurance, production and everything in between. Most
importantly, this practice’s main function is to keep an organization within the rules and
regulations set forth by government entities.
Conclusion
The aforementioned accounting practices all work collectively as separate entities
while simultaneously supporting the success of the next tier. This system (see graph
embedded in the introduction) is a continued cycle which helps promote the financial
success of any organization, by using present information and past outcomes to forecast
future achievements.

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References
Bookkeeping, Accounting, and Auditing Clerks : Occupational Outlook Handbook : U.S.
Bureau of Labor Statistics. (2015, December 17). Retrieved July 10, 2016, from
http://www.bls.gov/ooh/office-and-administrative-support/mobile/bookkeeping-
accounting-and-auditing-clerks.htm
Home : Occupational Outlook Handbook: : U.S. Bureau of Labor Statistics. (2015,
December 17). Retrieved July 16, 2016, from http://www.bls.gov/oco/
Scapens, R. W. (2006). Understanding management accounting practices: A personal
journey. The British Accounting Review, 38(1), 1-30.
doi:10.1016/j.bar.2005.10.002
Scot, L. (2010). The simplified guide to not-for-profit accounting, formation and
reporting. Hoboken, NJ: John Wiley & Sons.
U.S. Code: Title 26 - INTERNAL REVENUE CODE. (n.d.). Retrieved July 17, 2016,
from https://www.law.cornell.edu/uscode/text/26