Branches of Accounting: Accounting has universal application for recording transactions and events and presenting suitable information to aid decision-making regarding any type of economic activity ranging from a family function to functions of the national government. But hereinafter we shall concentrate only on business activities and their accounting because the objective of this study material is to provide a basic understanding on accounting for business activities. Nevertheless, it will give adequate knowledge to think coherently of accounting as a feld of study for universal application.
The growth of accounting discipline is closely associated with the development of the business world. Thus, to understand accounting as a feld of study for universal application, it is best identified with recording of business transactions and communication of financial information about business enterprise to facilitate decision-making. The aim of accounting is to meet the information needs of the rational and sound decision makers, and thus, called the language of business.
Branches of Accounting
Accounting has three main forms or branches viz. financial accounting, cost accounting and management accounting. In this article we will discuss about the main three branches of Accounting like Financial accounting, Management accounting and Cost accounting.
|Financial Accounting||Determining the financial results for the period and the state of affairs on the last day the accounting period||Stewardship Accounting|
|Cost Accounting||Information generation for Controlling operations with a view to maximizing efficiency and profit||Control Accounting|
|Management Accounting||Accounting to assist management in planning and decision making.||Decision Accounting|
(i) Financial Accounting: It is concerned with record-keeping directed towards the preparation of trial balance, profit and loss account and balance sheet. It is commonly termed as Accounting. The American Institute of Certified Public Accountants defines Accounting as ―an art of recoding, classifying and summarizing in a significant manner and in terms of money, transactions and events which are in part at least of a financial character, and interpreting the results thereof.‖
(ii) Cost Accounting: Cost accounting is the process of accounting for costs. It is a systematic procedure for determining the unit cost of output produced or services rendered. The main functions of cost accounting are to ascertain the cost of a product and to help the management in the control of cost. According to the Chartered Institute of Management Accountants (CIMA), Cost Accountancy is defined as ―application of costing and cost accounting principles, methods and techniques to the science, art and practice of cost control and the ascertainment of profitability as well as the presentation of information for the purpose of managerial decision-making.‖
(iii) Management Accounting: Management accounting is primarily concerned with the supply of information which is useful to the management in decision-making, increasing efficiency of business and maximizing profits. Management Accounting is concerned with the use of Financial and Cost Accounting information to managers within organizations, to provide them with the basis in making informed business decisions that would allow them to be better equipped in their management and control functions.
How Many Branches in Accounting
As a result of technology advancements and industrial and economic development, various types of accounting have evolved over time. Some popular types or branches of accounting are briefly discussed below:
- Financial accounting
- Management accounting
- Cost accounting
- Tax accounting
- Project accounting
- Not-for-profit accounting
- International accounting
- Government accounting
- Social accounting
- Forensic accounting
- Fiduciary accounting