As technology advances, more and more emphasis is being laid on the environment surrounding us. Recognizing the importance of environment, organizations are now formulating steps to promote green and environmental-friendly causes.

What is Green Accounting?

Green accounting or environmental accounting demonstrates an organization’s commitment towards key things – planet, people, and profitability. Environmental accounting practices are mainly used by companies to trace the environmental costs back to specific activities.

It incorporates the environmental assets and resources into the corporate accounts. It measures social, environmental and economic impact of business.

Types of Green Accounting

Below are three different types of green accounting:

1. Environmental Management Accounting: This type of green accounting incorporates both the environmental and economic information by identifying the resource usage and the expenses involved in companies’ economic impact on the environment.

2. Environmental Financial Accounting: This type of accounting is concerned with accounting for environmental transactions which have an impact on the financial performance of an organization.

3. Environmental National Accounting: This type of accounting involves national level accounting with a focus on green costs and natural resources.

The infographic below demonstrates the organizations’ commitment to people, planet, and profitability through Green accounting.

How does it work?

In the private sector, green accountants would guide their clients on the effect that various decisions in an organization may cause to the environment.

Here are some of the objectives of environmental accounting:

1. To connect physical resources with environmental accounts financially
2. To evaluate environmental benefits and costs to a concern
3. To categorize and separate environmental costs

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