In modern days, the scope of accounting is not confined only to the ascertainment of profits or losses of a business during a particular accounting period. Rather, its scope has widened to other areas as well such as providing useful information to the management which helps them in decision making and drafting their future plans. So, in order to fulfill the various requirements of management, accounting can be classified into different branches. These are as follows:
Branches of Accounting
Financial Accounting: it’s mainly concerned with identifying the transactions of monetary nature and their recording within the books, classifying, summarising, and communicating the business results. The main focus of this branch of accounting is to determine the profit or loss of a business by preparing a Trading and Profit and Loss Account. This also helps in assessing the financial position at the top of an accounting period by preparing the record. It also provides useful information to the management and to various other parties interested in the business. Financial accounting starts with a recording of business transactions in the books and ends with preparing the financial statements of the business.
Cost Accounting: It is another branch of accounting that is concerned with ascertaining the cost of production and its various elements. It is a process of classifying, recording, and ascertaining costs that provide relevant information for controlling the costs in the future and removing inefficiencies from the production process.
Management Accounting: This branch of accounting helps in presenting the financial data and results in such an easy manner so that vital and useful information can be easily and clearly available to the management. Management uses this information for drafting their future plans and their decision-making. In other words, it can be said that management accounting is a process of accounting under which management uses the information provided by financial and cost accounting for drafting future policies, controlling, organizing, and decision-making process.
Tax Accounting: This branch of accounting is a technique of accounting that is used for tax purposes. Tax accounting helps in handling the tax problems with a business-like computation of tax liabilities, filing tax returns, etc.
Social Responsibility Accounting: This is one of the important branches of accounting that studies the effects of business decisions on society. It is basically concerned with analyzing and interpreting the contribution of business to society. A business can contribute to society by generating employment, carrying out business without adversely affecting the environment, making customer-friendly products, etc.
Also, Read What is Accounting?