Classification of Accounting

In order to satisfy needs of different people interested in the accounting

information, different branches of accounting have developed.

Accounting is generally classified into three different disciplines as shown in

Figure.

Accounting

Financial Cost Management

Accounting Accounting Accounting

Financial Accounting: Accounting involves recording, classifying and

summarizing of past events and thus is historical in nature. It is Historical
accounting which is better known as Financial accounting whose primary intention
is to prepare the Statements revealing the Income / Loss and financial position of
the business on the basis of events, which have happened in the period being
reckoned.

But this information, though of immense vitality does not adequately aid the
management in planning, controlling, organizing and efficiently conducting the
course of the business as a result of which Cost Accounting and Management
Accounting are in place.

Cost Accounting: It shows classification and analysis of costs on the basis of

functions, processes, products, centers etc. It also deals with cost computation,
cost saving, cost reduction, etc.

Management Accounting: Management Accounting begins where Financial

Accounting and Cost Accounting ends. It deals with the processing of data
generated in financial accounting and cost accounting for managerial decision-
making. It also deals with application of managerial economics concepts for
decision-making.