Tax Accounting: Definition, Types, vs. Financial Accounting

Tax Accounting: Definition, Types, vs. Financial Accounting

What Is Tax Accounting? Tax accounting is a specific structure of accounting methods focused solely on taxes rather than the appearance of public financial statements. Basically, tax accounting is the means of accounting for tax purposes. The Internal Revenue Code governs tax accounting. It dictates the specific rules that companies and individuals must follow when preparing their tax returns.

Tax Accounting Principles vs. Financial Accounting (GAAP) In the USA, two sets of principles are used in accounting. The first is tax accounting principles and the second is financial accounting. Financial accounting is also called generally accepted accounting principles (GAAP). Under GAAP, companies have to follow a specific set of accounting principles, standards and procedures.

Types of Tax Accounting •

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Tax Accounting for Individuals: For an individual taxpayer, tax accounting focuses only on particulars like income, qualifying deductions, gains or losses in investments, and other transactions. Tax Accounting for Businesses: When it comes to businesses, more information has to be analyzed as part of the tax accounting process. An accountant in West Los Angeles primarily handles business accounting.

What Is the Main Purpose of Tax Accounting? The purpose of the duties of an accountant in West Los Angeles is to help companies and individuals make proper tax calculations and prepare tax documents in time for filing season.

What Is the Difference Between a Tax Accountant and a Management Accountant? A management accountant is an internal member who cannot work with external clients. A tax accountant, on the other hand, is an external party who can work with other businesses and individuals. Management accountants work with their own companies, but tax accountants help organizations and individuals comply with tax requirements.

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