Meaning Of Accounting – Accounting is that system under which the transactions and events of business are recorded in monetary terms. Under it, accounting terms and concepts are used to describe the events that make up the existence of business. It records the business transactions taken place during the accounting period. At the end of the period, it shows the result of the transactions in the form of final accounts consisting of profit and loss account and balance sheet. For preparing these accounting includes identifying, recording, classifying, summarising and interpreting the results of the business transactions, so that, accurate decisions may be taken regarding business. Accounting is a means of communicating business information relevant to the objectives of the decision makers both internal and external.
Branches Of Accounting
Now-a-days, scope of management has become very vast. For efficient working, it requires various types of information. As a result, its requirements are also increasing. To meet these requirements, accounting has various specialised branches or sub-fields. These branches are as under:
(1) Financial Accounting: It is the original form of accounting. It is concerned with recording of the business transactions in a systematic manner. After that, these transactions are classified and summarised to ascertain the net results and financial position of the business. For this purpose, profit and loss account and balance sheet are prepared. This branch of accounting provides the accounting information to the various interested parties of business whether internal or external.
(2) Cost Accounting: Cost accounting is a wide term and a formal mechanism in which costs of products and services are ascertained and controlled. Cost accounting includes the ascertainment of cost, applications of cost control methods, procedures etc. It is the accounting process of ascertaining the total cost and per unit cost of goods produced or service rendered by the business. It provides the way to have the scientific and fair view of the components of total cost and per unit cost of product or service. It has also been referred to an art of determining cost. The primary purposes of cost accounting include controlling cost, stimulating cost conciousness, ascertaining per unit cost of a product, determination of profit and loss for various products and services, inventory valuation etc. Mainly manufacturing and service units use this type of accounting.
(3) Management Accounting: The Word ‘Management Accounting is comprised of two words ‘Management’ and ‘Accounting’. It is the study of managerial aspect of accounting. It represents the financial data in such a manner that helps the management in carrying out its functions like planning, organising, directing and controlling more efficiently. Management accounting is also known as Accounting for Managerial Decisions’. Every firm requires relevant information for making decisions regarding efficient use of resources. These information are provided by the management. Through these information, the plans and policies are prepared for the business. Management Accounting’ is used to describe the modern concept of accounts as a tool of management. In addition to costing and accounting data, management also requires socio-economic and statistical data. These information are beyond the scope of cost accounting and financial accounting. Management accounting removes these limitations and provides all possible information needed for managerial purposes. When accounting caters to need of internal uses of the management, then it is known as ‘Management Accounting’.
(4) Tax Accounting: Such accounting is concerned with that system which helps in solving the tax problems. All the transactions which are related to tax i.e. income tax, sales tax, etc. are computed on the basis of tax accounting.
(5) Government Accounting : The accounting done by central, state and local government is termed as government accounting. It includes budget, public accounts, reserve funds, contingent funds, etc.
(6) Social Responsibility Accounting : The business and the society bear a ‘give and take’ relationship. As we see that the society provides factors, services, market and other assistance to the business, so it becomes necessary that the business must bear some responsibilities towards the society. That is why, the concept of Social Responsibility Accounting’ has gained much importance these days. At present, the business is expected to shoulder the responsibility of providing employment, better products, social security, etc. to the common mass. Various techniques have been developed these days in order to measure the contribution of the business towards the welfare of the society.
(7) Human Resource Accounting: Human resource accounting may be defined as the measurement and reporting of the data about human resources as organisational resources and communicating this information to the various interested parties of the business. Thus in modern time, different branches of accounting are required by the managers for the effective operation of managerial activities.