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BRANCHES OF ACCOUNTING

In order to satisfy the need of different in accounting information, different


branch of accounting have been developed. They can be classified into two
categories.

Accounting

Finance Accounting Management Accounting

Financial Accounting It is the original from of accounting. It is mainly confined


to the preparation of financial statement for the use of outsiders like
shareholders, debenture holders, creditors, banks and financial institution. The
financial statement, i.e. the profit and loss account and the Balance sheet,
show then the manner in which operation of the business have conducted
during a specified period.

Management Account it is accounting for the management which provides


necessary information to the management for discharging its functions.
According to the chartered institute of Management accountants, London,
“management accounting is the application of professional information in such
a way as to assist the management in the formation of policies and in the
planning and control of the operation of the undertaking.”

It cover all arrangement and combination of adjustment of the orthodox


information to provide the chief executive with the information from which he
can control the business, i.e. information about fund, cost, profit, etc

Management accounting cover various areas such as cost accounting,


budgetary control, inventory control, statistical methods, internal auditing, etc,

DIFFERNCE BETWEEN MANAGEMENT ACCOUNT AND FINACIAL ACCOUNT-

Financial accounting and management accounting are closely inter-related


since management accounting is to a large extent concerned with the
rearrangement of the data provided by financial accounting. Moreover, all
accounting are financial in the sense that all accounting system are in
monetary terms and the management is responsible for the contents of the
financial accounting statement. In spite of such a close relationship between
the two, there are certain fundamental difference can be laid down as follows:
Objectives- financial accounting is designed to supply information in the form
of profit and loss account and balance sheet to external parties like
shareholder, creditor bank, investor, and Government. Information is supplied
periodically and is usually of a nature in which management is not very
interested. Management account is designed principally for internal use by the
management.

Analysing performance financial accounting portrays the position of


business a whole. The financial statement like income statement and balance
sheet report on overall performance or status of the business. On the other
hand management accounting direct its attention to various division or
department of the business and reports about the profitability, performance
etc. Of each of them. Finance accounting deals with the aggregates and there
for cannot reveal what part of the management action is going wrong and why.
Management accounting provided analytical data to arrive at this.

Data used – financial accounting is concerned with the monetary record of


past events. It is post-mortem analysis of past activity and there for out-of-
date for management action. Management accounting is accounting for future,
and there for supplied data both for the present and for the future, duly
analysed and in detail, in the “managing the value of management language.”
This become the for management action.

Monetary measurement – in financial accounting, only such economic event,


which can be described in term of money, find a place. However the
management is equally interested in non-monetary economic events,.
Technical innovations, personnel in the organisation changes in the value of
money, etc. These events affect management decision and there for
management accounting cannot afford to ignore then. For example ,change of
the value of money may not find a place in financial accounting on account of
going concerned management will have to take this factor into account

Periodicity of reporting- The period of reporting is much longer in finance


accounting as compare to management accounting. The statement and the
balance sheet usually or in some cases half-year. Management require. In
information at frequency interval and there for , finance accounting fails to
cater to the need of the management . in management accounting there is
more emphasis on furnishing information quickly and at comparatively short
interval as per the requirement of the management.

Precision- There is less emphasis on precision in case of management


accounting is more subject. This is because since the information is meant for
internal use.

Nature- financial accounting is more objective while management accounting


is more subjective. This is because management accounting is fundamentally
based on judgement rather than on measurement

Legal compulsion- financial accounting has more or less become compulsory of


every business on account of the legal provisional of one or the other act.
However a business is free to install or not to install a system of management
accounting.

The above of point of different between financial accounting and


management accounting prove that management accounting has a flexible
approach as compared to the rigid approach in the past while management
accounting shows how the business has perform in the future.

Objective of accounting-

The following are the main objectives of accounting :

To systematic record- accounting is done to keep the record of financial


transaction. In the absence of accounting there would have been a terrific on
burden on human memory in most cases would have been impossible to bear

To protect business properties- accounting provided protection to business


properties from unjustified and unwarranted use. This is possible because,
supplies the information to the management or proprietor.

1 the amount of the proprietor’s funds invested in the business


2 how much business has to pay to other
3 how much the business has to recover from other
4 How much the business has in the form of (a) fixed assets, (b) cash in
hand (c) cash at bank (d) stock of raw materials, work – in progress and
finished good.
To ascertain the financial position of business- The profit and loss account
given the amount of profit or loss made by the business during a particular
period. However, it is not enough. The businessman must know about his
financial position, i.e. what he owes and what he owes. This objective is
served by the balance a particular data. It serves as a barometer for
ascertaining the financial health of the business.

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