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In order to meet
the ever increasing demands made on
accounting by
different interested parties (such as owners,
management, creditors, taxation authorities and
other govt. agencies etc.) the various branches of
accounting have come into existence.
These branches
are as follows:
- Financial accounting
- Cost accounting
- Managerial accounting
The above three branches of accounting are
briefly discussed below:
1. Financial Accounting:
The main purpose
of financial accounting is to ascertain the true
result (profit or loss) of the business operations
during a particular period of time and to state the
financial position of the business on a particular
point of time.
Financial
accounting produces general purpose reports for the use
by the great variety of people who are interested in
the organization but who are not actively engaged in
its day-to-day operation.
2. Cost Accounting:
The main object
of cost accounting is to determine the
cost of
goods manufactured or produced by the business. It
also helps the management of the business in
controlling the costs by indicating
avoidable losses
and wastes.
In order to set prices of the
products of the companies, correct calculation of
all manufacturing as well as non-manufacturing costs
is necessary. Cost accounting is also helpful to
accomplish this task.
3. Managerial Accounting:
The object of
managerial accounting is to communicate the
relevant information periodically to the management
of the business to enable it to take suitable
decisions.
Financial
accounting is the oldest and the other branches have
developed from it according to the need of different
parties. The objects of financial accounting can
only be achieved by recording business transactions
in a systematic manner according to a set of
principles. |
