Branches of Accounting

As there are many branches in a tree which all are different but they are part of a tree, in the same way there are 3 branches in accounting which are different but they are part of accounting. These three branches of accounting are financial accounting, management accounting and cost accounting. Let’s look at these branches one by one

1. Financial Accounting – Financial accounting is that branch of accountancy which is concerned with preparation of financial statements like balance sheet and profit and loss account for the external parties. Financial accounting records those transactions which have already happened, in other words it is historic in nature. Financial accounting forms the basis of management accounting as management accounting uses the information from financial accounting.

2. Management Accounting – This branch of accounting has evolved only few years back, it refers to the use of accounting information for the benefit of the internal parties like managers and owners of the company so that they can make decisions related to company effectively and efficiently. Management accounting is forward looking because it is used by the management to make decisions related to future. Management accounting is flexible as it does not have to comply with generally acceptable accounting principles because it is for internal use only and it is not published like financial accounting statements.

3. Cost Accounting – Cost accounting is that branch of accounting which helps the company in determining the cost of the product or service which is manufactured by the company. Cost accounting is also a means by which company can exercise control over the cost of a product, because using cost accounting one can predetermine the price of a product and once the product is manufactured company can match actual cost and predetermined cost and find out the reasons for any divergence between the two.

As one can see from the above that though all 3 branches of accounting are different but all of them are interlinked and equally important for a company and therefore any company cannot afford to choose between any one of them rather they are used in combination by almost all the companies around the world.

0 comments… add one

Leave a Comment


Related pages


for a monopolistic competitorcharacteristics of a autocratic leaderadvantage of debit cardsalaries payable journal entryadvantages and disadvantages of specialisationwhat are liquid assets examplesindirect quotationtypes of price elasticity of demand with graphsvariable costing advantagesdisadvantages of economic globalizationcrossed chequesunqualified audit report examplefunctions of derivative marketjournal entries for outstanding expensesdisadvantages of cashless policya2z maintenance & engineering servicesforeign direct investment advantages and disadvantageswhat is autocratic leadership styleadvantages of stable dividend policyhow to fill out a bank withdrawal slipconglomerate merger definitioncompare socialism and capitalismslr in rbidisadvantages of barter systemfifo disadvantagesformula for roceconsignee consignor meaningelasticity of demand with examplesadvantages and disadvantages of decentralizationdirect quote and indirect quote foreign exchangewhat is a conglomerate in economicsplr rate of sbimarket penetration pricing exampleassumption of capm modelbenefits of centrally planned economydefine drawings in accountingwhat is capm in financemain features of globalisationautocratic organizationwhat is the difference between durable and nondurable goodsmarginal costing definition accountingautocratic managementcrr and slr rbidisadvantages of break even analysissteps on how to withdraw money from atmexamples of direct and indirect quotesdefine junk bondsdurables goodsdefine a mixed economylimitations of capital budgetingmeaning of unsystematic riskobjectives of demat accountadvantages of pricing strategiesdiff between cash flow and fund flowthe merits and demerits of internetadvantages and disadvantages of market penetrationimplications of capmdisadvantages of international trade for developing countriesmerchant banking pptwhat is the materiality conceptwhat is the difference between oligopoly and monopolyadvantages and disadvantages of oligopoly competitionskimming priceswhat does the law of diminishing marginal utility statedisadvantage of modernizationpayback in financewhat is factoring in bankingadvantages of merger and acquisition pdfwhat is inferior goods in economicsfdi abbreviationecs system in bankmarket skimming price strategyautocratic coaching