Branches of Accounting
THEINTACTFRONT23 JUN 20192 COMMENTS
1. FINANCIAL ACCOUNTING
Financial Accounting is based on a systematic method of recording transactions of any business
according to the accounting principles. It is the original form of the accounting process. The main
purpose of financial accounting is to calculate the profit or loss of a business during a period and
to provide an accurate picture of the financial position of the business as on a particular date. The
Trial Balances, Profit & Loss Accounts and Balance Sheets of a company are based on an
application of financial accounting. These are used by creditors, banks and financial institutions
to assess the financial status of the company. Further, taxation authorities are able to calculate the
tax based on these records only.
2. COST ACCOUNTING
Cost accounting deals with evaluating the cost of a product or service offered. It calculates the
cost by considering all factors that contribute to the production of the output, both manufacturing
and administrative factors. The objective of cost accounting is to help the management in fixing
the prices and controlling the cost of production. It also pin points any wastages, leakages and
defects during manufacturing and marketing processes.
3. MANAGEMENT ACCOUNTING
This branch of accounting provides information to management for better administration of the
business. It helps in making important decisions and controlling of various activities of the
business. The management is able to take decisions efficiently with the help of various
Management Information Systems such as Budgets, Projected Cash Flow and Fund Flow
Statements, Variance Analysis reports, Cost-Volume-Profit Analysis reports, Break-Even-Point
calculation, etc.
Management accounting and financial accounting are not to be confused with each other. Both
are different. Management accounting serves the needs of the management in decision makings
regarding minimization of the cost factor and enhancing of profit making. Financial accounting
serves the needs of shareholders, creditors and financial institutions for ascertaining the financial
position of the company. Management accounting records are kept secret for the use of
management only. They are not made public.
4. AUDITING
Auditing is a branch of accounting where an external certified public accountant known as
Auditor inspects and certifies the accounts of a business for their accuracy and consistency.
Sometimes internal auditing is also practiced where an employee of the same company audits the
accounts on the regular basis and aids the management in keeping accurate records for audit
purpose.
5. TAX ACCOUNTING
Tax Accounting deals with taxation matters. Its functions include preparation and filing of
various tax returns and dealing with their legal implications. Tax accountants aid in minimizing
tax payments and also help financial accountants in preparing financials for tax reporting to
various authorities. Tax accounting involves consultancy regarding the effect of taxes on different
aspects of business, minimizing tax through legal ways and also verifying consequences of tax
payable on business.
6. FUND ACCOUNTING
It deals with keeping records for funds of non-profit business entities. Separate fund accounts are
maintained for separate works like welfare schemes of different nature to ensure proper
utilization of funds.
7. GOVERNMENT ACCOUNTING
It is done for Central Government (National Government) and State Government budget
allocations and utilization. Keeping records ensures proper and efficient utilization of the various
budget allocations and safety of public funds.
8. FORENSIC ACCOUNTING
Forensic Accounting also known as legal accounting enables calculating damages or settling
disputes in legal matters. Investigations are done and calculations are carried out to evaluate the
damages accurately.
9. FIDUCIARY ACCOUNTING
It is the accounting and evaluation of a third party’s business and property maintained under the
guardianship of another person.
