Branches of Accounting

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: 1. Financial accounting 2. Cost accounting 3. 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.