BRANCHES OF ACCOUNTING

Accounting provides financial information to various users through financial reports and statements.
To fulfill the needs of financial information of a variety of users, various types or branches of
accounting, also known as sub-fields of accounting, are classified and co-existed, such as Financial
Accounting, Management Accounting, Cost Accounting, Social Responsibility Accounting, and Human
Resources Accounting.

Branches of Accounting:

•Financial Accounting

Financial accounting is the part of accounting that is especially concerned with the historical and
custodial aspects of external reporting to shareholders, government, and the other users of
accounting information external to the business entity. The purpose of this branch of accounting is to
keep systematic records to ascertain financial position and performance and to communicate with the
interested internal and external users. Therefore, financial accounting emphasizes the
stewardship aspect of accounting rather than the control or decision making aspect of
accounting.

•Management Accounting

Management accounting is one of the branches of accounting that is focused mainly on the
internal reporting to the manager of all level of an entity. It uses the accounting techniques
for providing information designed to assist management in planning, controlling, and decision-
making activities of the business entity. It is not only limited to the scope of cost control but also
equally covers other areas like capital expenditure decision, choosing the product line, capital
structure and gearing decision, etc.

•Cost Accounting

Cost accounting is the branch of accounting that is focused on the accumulation and assignment
of historical cost to the units of product and departments, primarily for the purpose of
valuation of stock and measurement of profit. It is the process of recording and controlling the
cost of the product. It helps in ascertaining the cost of units produced and solve or services rendered
by the business unit with a view of exercising control over these costs to assess the profitability and
efficiency of the entity.

•Social Responsibility Accounting

It is the process of identifying, measuring, and communicating the social effects of the business
decision to permit informed judgments and decisions by the users of information. It is an accounting
of social costs and benefits.

•Human Resource Accounting

It is an attempt to identify, quantify, and report investments made in human resources of an

organization that is not presently accounted for under conventional accounting practice.

© 2021 Athena Global Education. All Rights Reserved

© 2021 Athena Global Education. All Rights Reserved