Running head: ACCOUNTING 1

Accounting

Name

Institution
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Introduction to branches of Accounting

Accounting is an important concept that its history can be traced back centuries ago. Many

businesses, based on numerous transactions made in a day requires accountability and proper

records keeping for such in information in order to enhance other activities within a business

enterprise such as communication. With the absence of accounting for businesses, this would act

as a stabling block for the attainment of organizational objectives such as profit maximization as

management of resources requires proper innovative structures for accountability.

According to Dyson (2004) the accounting branches can be segregated into three key

areas; financial, cost, tax and managerial accounting (Dyson, 2004, p.12). Accounting plays a

significant role in different business enterprises especially on key areas such decision-making,

giving information, protection of business from various transactions involved with other business

environments and explaining the business position. Financial Accounting is the art of managing

business financial recording that stipulates the business position, and it progress in growth

through the analysis of profits and losses. According to Babarinde (2003) financial accounting is

a system that deals with explaining the situation and the state of affairs for businesses through

preparation of financial statements such as the balance sheet and trade and profit loss account

(Babarinde, 2003 p. 313). Financial accounting also plays a significant role in running a business

enterprise as the system give the estimates of costs on products, functions, activities and the firm

progress. Through financial accounting, the management in a business entity can get quality

information to plan through budgeting that gives estimates on expected expenditures.

Cost accounting is the system used in controlling activities of production that would

regulate expenditures for the business in order to enhance profit maximization. According to

Abeygunasekera and Fonseka (2013) every business has its control system that helps in cutting
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cost either through the production processes such as manufacturing, recruitment, training and

development and delivery of services. Through such processes, cost accounting acts a system for

the management to control such expenditures incurred through transactions with different

business environments as well as in the processes of availing goods and services to consumers

(Abeygunasekera & Fonseka, 2013).

Managerial accounting is the process that facilitates the management with information

concerning the company’s progress that enhances the management in carrying out their day to

day functions. The management in every business ought to have the facts in decision-making,

planning, and in the development of policies and through managerial accounting such is

facilitated. According to Mbroh (2013) he argued that in managerial accounting, frequent

information is made obtainable to the management such as information on funds, profit and cost

that gives a bulge of the business advancement and must be factual in support of truth and

fairness (Mbroh, 2013).

Recommended accounting methodology for companies

It is necessary for the management of any business to how commitment in recording

business transactions as this information can be retrieved for further use when such information

is required. There are for instance methods of accounting that are commonly used across

bossiness in the world of today. This includes the single entry and doubles entry methods that are

used interchangeably in businesses. Use of double entry techniques has proved to have various

advantages for many that use it. In the double entry, two columns are created for transaction

entries in both what the company receives and also spends while running the business.

By following the right procedures in preparation of journals, trial balance, and final

account, the use of the double entry techniques businesses benefits in different ways that is
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recommendable. Through such a system, the management is also to create the accounting book

through a device known as the trial balance that give more accurate inform about the business

transaction.

It is also easier to ascertain on the profits and losses incurred by a business if the transaction

entries are properly entered in the trial balance device.

According to Mbroh (2013) he also argued that a financial statement such as the

balance sheet, the system gives accurate information concerning the position of the business

enterprise (Mbroh, 2013). The management is also able to know if the firm has made any

development such as profit maximization and growth. This as well regulates spaces for errors as

the transaction entries in both the debit and the credit side should balance in the system.

Through the double entry system, the management is also able to carry out a comparison study

during a specific period such as between two consecutive years. It also becomes easier in making

decisions for the business as the business position is made clear for instance in the trade and

profit loss accounts.

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References

Abeygunasekera, A.W.J.C and Fonseka, A. T (2013) Non-Compliance with Standard

Accounting Practices by Small and Medium Scale Enterprises in Sri Lanka.

Babarinde A. (2003) Financial Accounting, Volume 1, Lagos: JBA Associates Ltd.

Dyson J. R (2004) Accounting For Non-Accounting Students, 6th Ed. Financial Times/ Pitman

Publishing Imprint, England.

Mbroh, (2013) Accounting and Control Systems Practiced By Small and Micro Enterprise

Owners within the Cape Coast Metropolitan Area of Ghana in Asian Journal of Business

and Management Sciences Vol. 1 No. 9 [28-47]