With the emergence of various corporations, industries and technological developments, the business operations have resulted in large scale operations of businesses which have resulted in the vast scope of accounting. Therefore, there is a requirement of various kinds of accounting information for which different sub fields or the branches of accounting prevail these days.
The different branches of accounting are as follows:
1. Financial Accounting:
Financial Accounting covers identifying, recording, classifying & summarizing of the financial transaction. It also includes the final step i.e., preparation of the financial statements that includes Trading and Profit & Loss A/c & Balance sheet and their interpretation. Using this, the useful information such as net earnings and the financial position of the business on the given date can be communicated to the users of the financial statements.
2. Cost Accounting:
Cost Accounting is that branch of accounting that helps in determination of cost of goods manufactured & services rendered by the business organization by analyzing the expenditure on the manufacturing of product and rendering of service and thereby fixing the selling price of such goods & services. It also helps the management in controlling cost of the products and providing necessary information related to costing to the management for decision making.
3. Management Accounting:
Management Accounting is concerned with the accounting of the necessary information required by the people within the organization for decision making, stewardship and planning &controlling of operations of the business. It mainly draws the information/conclusions from the records of cost accounting & financial accounting which thereby helps the management in the assessment of earnings of the business,to exercise control over the cost of the product & service, to draw budgets and to take the decisions regarding capital expenditures etc. Also other information generated by management accounting includes sales forecast, manpower needs, environmental data, cash flows etc.
4. Tax Accounting:
When the accounts of the business is prepared for the purpose of computing any kind of tax such as income tax, goods & service tax, import duty, Value added tax etc. then such accounting is known as Tax Accounting. Tax accounting mainly focuses on the computation of taxes rather than the preparation &presentation of the financial accounts for the users of the business.
5. Human Resource Accounting:
In the conventional accounting approach, Human resources are not accounted but in today’s scenario employers are aware that their employees are the useful asset for the organization. Therefore, Human Resource Accounting refers to the accounting where the investment made in the human resource is identified, quantified and reported.
6. Social Responsibility Accounting:
The society provides various inputs to the business organization that are key requirements to run any business such as land, labor, infra-structure, capital & other important facilities. Also an enterprise incurs various social costs such as exploitation of resources, pollution etc. while earning profits. Therefore, it is the responsibility of every business to provide social benefits to the following:
- Employees: The social responsibility of any business towards their employees includes payment of fair wage, open hospitals, open education centers for their children, provide housing facility etc.
- Consumers:The social responsibility of any business towards their consumers includes providing good quality products at a fair price, providing after sales services, opening grievances redressal cell etc.
- Shareholders:The social responsibility of any business towards their shareholders includes capital appreciation, fair return on their investment & providing bonus shares or right shares etc.
- Society: The social responsibility of any business towards the society includes Pollution control, setting up community hospitals, gardens or schools, plantation of trees etc.
The enterprise should record the social cost incurred by it along with the amount spent on the social responsibility such that a report can be generated evaluating the social cost incurred and social benefits created by the business.
Final Thought – Branches of Accounting:
Thus, with the vast scope in the accounting, every area of business is separately accounted. Even the social responsibility accounting, human resource accounting are considered important apart from the financial accounting, cost accounting, management accounting, tax accounting etc.