BRANCHES OF ACCOUNTING

 

BRANCHES OF ACCOUNTING

 

The changing business scenario over the centuries gave rise to specialized branches of accounting which could cater to the changing requirements. The branches of accounting are;

 

i) Financial accounting.

ii) Cost accounting; and

iii) Management accounting.

 

Now, let us understand these terms.

Financial Accounting

The accounting system concerned only with the financial state of affairs and financial results of operations is known as Financial Accounting. It is the original from of accounting. It is mainly concerned with the preparation of financial statements for the use of outsiders like creditors, debenture holders, investors and financial institutions. The financial statements i.e., the profit and loss account and the balance sheet, show them the manner in which operations of the business have been conducted during a specified period.

 

Cost Accounting

In view of the limitations of financial accounting in respect of information relating to the cost of individual products, cost accounting was developed. It is that branch of accounting which is concerned with the accumulation and assignment of historical costs to units of product and department, primarily for the purpose of valuation of stock and measurement of profits.

Cost accounting seeks to ascertain the cost of unit produced and sold or the services rendered by the business unit with a view to exercising control over these costs to assess profitability and efficiency of the enterprise. It generally relates to the future and involves an estimation of future costs to be incurred. The process of cost accounting based on the data provided by the financial accounting.

 

Management Accounting

It is an accounting for the management i.e., accounting which provides necessary information to the management for discharging its functions. According to the Anglo-American Council on productivity, “Management accounting is the presentation of accounting information is such a way as to assist management in the creation of policy and the day-to-day operation of an undertaking.”

It covers all arrangements and combinations or adjustments of the orthodox information to provide the Chief Executive with the information from which he can control the business e.g. Information about funds, costs, profits etc. Management accounting is not only confined to the area of cost accounting but also covers other areas (such as capital expenditure decisions, capital structure decisions, and dividend decisions) as well.

 

 

 

 

 

References

http://www.investopedia.com/university/accounting/accounting2.asp

http://accountingtheory.weebly.com/branches-of-accounting.html

http://accounting-finance.knoji.com/what-are-the-main-branches-of-accounting/

http://www.svtuition.org/2009/10/branches-of-accounting.html

http://answers.yahoo.com/question/index?qid=20070616230833AAlqPwR

http://wiki.answers.com/Q/What_are_the_different_branches_of_accounting?#slide=1

 

 

 

 

 

 

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