Blog #28 - Branches of Accounting

 

What are the branches of Accounting? 

 

Financial Accounting:

The main purpose of this branch of accounting is to ascertain profit or loss during a specific period, to show financial position of the business on a particular date and to have control over the firm’s property. Such accounting records are used to impart useful information to outsiders and to meet the legal requirements.

 

 

 

Cost Accounting:

The main aim of the cost accounting is to ascertain cost relating to the various activities of the business and to have cost control. The cost accountant is required to assemble and interpret cost data for the use of management in controlling current operations and in planning for the future.

 

 

Management Accounting:

It supplies the management significant information in order to assist the management to discharge its various functions such as planning, control, evaluation of performance and decision making etc.

 

 

Tax Accounting:

Different types of taxes have to be paid by an enterprise on behalf of itself or on behalf of others, such as employees, shareholders etc. Tax accounting is helpful in  complying with the provisions of complex tax laws governing income tax, sales-tax, excise duties, custom duties and estate duties. 

 

 

Social Responsibility Accounting:

It is concerned with social responsibility aspects of a business. Management is held responsible for what it contributes to the social well being and progress. It is process of identifying, measuring and communicating the social effects of the business decisions to permit informed judgment and decisions by the users of information.

 

 

 

What are advantages of Accounting?

In a large business it is very difficult for a businessman to remember all transactions. Accounting provides records which will furnish information as and when desired and thus it replaces human memory.

 

Properly maintained accounts are often treated as a good evidence in the court to settle a dispute.

 

If accounts are properly maintained, it will be of great assistance to the businessman in settling the income tax and sale tax liability otherwise tax authorities may impose any amount of tax which the businessman will have to pay.

 

It provides the facility of comparative study of the various aspects of the business such as profits, sales, tax, expenses etc. with that of previous year and helps the businessman to locate significant factor leading to the change.

 

If accounts are properly maintained, it helps to ascertain the proper purchase price in case the businessman is interested to sell his business.

 

If a person if maintaining proper account and unfortunately he becomes solvent, he can explain many things about the past with the help of accounts and can start a fresh life.

 

Accounting facilitates raising loans from the lenders by providing them the required financial information.

 

Accounting assists the management in taking managerial decisions. For example, projected cash flow statement facilitates the management to know the future receipts and payments and to take decisions regarding anticipated surplus or shortage of funds.

 

Accounting facilitates control over assets by providing information regarding cash balance, bank balance, stock debtors, fixed assets etc.

 

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