BRANCHES OF ACCOUNTING
To meet the ever-increasing demands made on accounting by different interested parties such as owners, management, creditors, taxation authorities etc., the various branches have come into existence. There are as follows :
1. Financial accounting. The object of financial accounting is to ascertain the results (profit or loss) of business operations during the particular period and to state the financial position (balance sheet) as on a date at the end of the period.
2. Cost accounting. The object of cost accounting is to find out the cost of goods produced or services rendered by a business. It also helps the business in controlling the costs by indicating avoidable losses and wastes.
3. Management accounting. The object of management accounting is to supply relevant information at the appropriate time to the management to enable it to make decisions and effect control.
In this lesson, we are concerned only with financial accounting. Financial accounting is the oldest and other branches have developed from it. The objects of financial accounting, as stated above, can be achieved only by recording the financial transactions in a systematic manner according to a set of principles. The art of recording financial transactions and events in a systematic manner in the books of account is known as book-keeping. However, a mere record of transactions is not enough. The recorded information has to be classified, analyzed and presented in a manner in which business results and financial position can be ascertained.