“A systematic record of the daily financial events of a business leading to presentation of a complete financial picture is known as accounting”
Accounting has been divided into three branches, financial accounting, cost accounting, and management accounting and each branch of accounting is inter – related with other branch. No one branch is perfect without other branch of accounting.
“The Accounting system concerned only the financials state of affairs and the financial results of operations. This is called financial accounting”. It includes preparation of accounts (Journal, Subsidiary books, ledger and Trail Balance) on historical basis and Provides Financial Statements (Profit & loss Account and Balance Sheet). It presents a general idea of the working of the business and permits management to control in general way the major functions of a business, viz. finance, administration, production and distribution.
The main object of Financial Accounting is to find out the profitability and financial position of the organization and it is provided to Insiders (Owners and Employees) and outsiders (creditors, banks and Financial Instructions) of the organization.
Cost Accounting means “ascertain the cost of the product and to help the management in the control of cost”. Cost of individual jobs and Products reports not available in Financial Accounting. So Cost Accounting was developed.
The main object of Cost Accounting is to find out the cost of goods produced or services rendered by business. It also helps the management to detect and control all leakages, defective works, and wastage in tools and stores. Cost Accounting information useful at time of making numerous decisions and for exercising control over the costs being occurred. Cost Accounting basically involves estimating costs in advance and detailed analysis.
Third branch of accounting is Management Accounting. “Accounting which provides necessary information to the management for to take decisions and to control various business activities”. The primary objective of Management Accounting is to supply relevant information at appropriate time to the management to enable it to take the decisions and effect control.
It means such accounting as will enable management to discharge its functions properly, chiefly in respect of forecasting and budgeting, control over costs and revenues decisions, both routine and strategic.
Branches Accounting Process and Reports
|Financial Accounting||Cost Accounting||Management Accounting|
|Journal||Cost Sheet||Trend Analysis|
|Subsidiary Books||Material Cost||Ratio Analysis|
|Ledger||Labour Cost||Funds flow statement Analysis|
|Trail Balance||Other Expenses Cost||Cash flow statement Analysis|
|Profit and Loss Account/Income and Expenditure statement||Standard Cost Report||Budgetary Reports|
|Balance Sheet||Variance Report||MIS Report|
|Break Even Analysis||Interpretation|
|Managerial cost report|
|Price determination report|