Read this article to learn about the following four branches of accounting, i.e., (1) Financial Accounting, (2) Cost Accounting, (3) Management Accounting, and (4) Social Responsibility Accounting.
1. Financial Accounting:
Financial accounting is that part of accounting which is concerned with identification, measuring, and recording, classifying, summarizing, interpreting and communicating the results of the financial transactions of an organization. Financial accounting is primarily concerned with providing of financial information of the business enterprise to all its stakeholders.
2. Cost Accounting:
Cost accounting is that part of accounting which is concerned with the process of accounting and controlling the cost of units produced or services rendered by the business enterprise. The main aim of the cost accounting is to exercise control over the cost of production and services and to assess the profitability & efficiency of the business enterprise. The whole process of cost accounting is based on the information provided by the financial accounting.
3. Management Accounting:
Management accounting is that part of accounting which is concerned with the decision making process of the management. Management accounting is not based on generally accepted accounting principles and is based on the whims of management. Management accounting is a tool for sound planning and effective controlling by the management. It helps the management for taking decisions in respect of ‘make or buy’, ‘shut-down point’, ‘fixing selling price of the product’ etc.
4. Social Responsibility Accounting:
Social responsibility accounting is that part of accounting which is concerned with the process of identification, measurement and communicating the contribution made by the business enterprise to the society in which business enterprise is born and thereafter grows.
A few examples of contributions given by the business enterprise are environmental contribution, employment generation, financial aid to the weaker sections of the society, providing residential accommodation and low cost education to the weaker sections of the society etc.
The main focus of social responsibility is to measure the cost of the above said contributions and report to the management, society and law enforcing agencies/departments such as Pollution Control Department, Environment & Forests etc. In addition to the above, Tax Accounting and Human Resource Accounting have also gained importance and have been included as sub-disciplines in the scope of accounting.