Branches of Accounting

Branches of Accounting: The economic development and technological improvements have resulted in an increase in the scale of operations and the advent of the company form of business organization. This has made the management function more and more complex and increased the importance of accounting information. This gave rise to special branches of accounting.

Branches of Accounting are briefly explained below.

Financial Accounting | Branches of Accounting

The process of identifying, measuring, recording, classifying, summarising, analysing, interpreting and communicating the financial transactions and events is known as financial accounting.

The purpose of this branch of accounting is to keep a record of all financial transactions, so that

The profit earned or loss sustained by the business during an accounting period can be worked out.
The financial position of the business as at the end of the accounting period can be ascertained.
The financial information required by the management ’ and other interested parties can be provided.

Cost Accounting | Branches of Accounting

It is the process of ascertaining and controlling the cost of a product, operation or function.
The purpose of cost accounting is to analyse the expenditure, so as to ascertain the cost of various products manufactured by the firm and fix the prices. It also helps in controlling the costs and providing necessary costing information to management for decision-making.

Management Accounting

It is the use of accounting techniques for providing information to help all levels of management in planning and controlling the activities of business to enable decision-making.
The purpose of management accounting is to assist the management in taking rational policy decisions and to evaluate the impact of its decisions and actions. Management accounting not only includes cost accounting but also covers other areas such as capital expenditure decisions, capital structure decisions, dividend decisions.

Social Responsibility Accounting

It is the process of identifying, measuring and communicating the social effects of business decisions to various users to enable judgements and decision-making by them. It is accounting for social costs and social benefits.
* Accounting for environment and ecology is part of social responsibility accounting.

Human Resource Accounting

It is the process of identifying, measuring and communicating the value of investments made in human resources of an enterprise.