What Is Micro Accounting?

Micro accounting is essentially any sort of accounting that happens on a small, often individual level. The term is most often applied to personal accounting and small business settings, though it can also include entire corporations or government divisions, depending on the context. Usually, micro accounting deals with pieces and focuses on the accounting options and liabilities for independent people or divisions. Larger economic ramifications and external comparisons are usually excluded.

In order for an accounting scheme or plan to be considered “micro,” it must be a small part of a larger whole. The accounting of the whole, be it a society, a corporate sector, or a nation, is known as macro accounting. Macro accounting is the natural inverse of micro accounting and usually focuses more on sweeping trends than on individual choices.

Most of the accounting done in common society is done on the micro level. Individual tax accounting is a good example of micro accounting in action. In this setting, an accountant meets with an individual, a couple, or a family to help them structure and plan for tax liabilities. The accountant must have a broad understanding of local tax laws and generally accepted accounting principles, but his or her advice is usually tailored specifically to the client. What the client needs defines the borders and outermost parameters of the accounting experience.

Forensic accounting is generally micro in nature, as well. Courts of law often call upon forensic accountants when investigating alleged fraud, breach of contract, or general error that may have led to damages. Deconstructing financial statements is usually very particular. The work required is often highly individualized, as accounting evidence is commonly divorced from any larger schemes that it may have once been a part of.

Corporate finance and business accounting can also come under the broad umbrella of micro accounting, so long as the focus is on individual outcomes, not the study of industry trends. An accountant who helps keep corporate books balanced and oversees how profits are reported and tallied can be considered a micro accountant. At the same time, a similarly situated professional who uses the same books to make predictions about how the company will fare in the marketplace, what the next decade will bring, or what discreet behavioral accounting says about corporate needs is usually considered more of a macro accountant. Accountants in both sectors can and do work together, but there is rarely any overlap between their tasks.

Micro accounting is almost always regulated on a national and sometimes local level, depending on the jurisdiction. Regulations are usually designed with a couple of key goals in mind. Ethics and professionalism are usually at the forefront, followed by honesty and fair dealing. So-called “voodoo accounting,” which is the practice of inflating revenue and falsifying books in order to appear more profitable than truth would dictate, is a common problem in corporate micro accounting. Laws that set out minimum standards of transparency and accountant conduct are usually aimed at curbing this practice, as well as minimizing all harms that come from sloppy accounting, whether intentional or not.