Branches of Accounting

Accounting is divided mainly into three categories which include:

Financial Accounting Financial Accounting is the recording of business transactions in the books of account so that the operating results of a particular period and financial position on a particular date can be known.

Examples include:

  • Recording of financial transactions (purchase of assets, raw material, payment for goods, services, utilities etc.)
  • Bookkeeping (preparation of general ledgers, trial balance etc.)
  • Preparation of financial statements including balance sheet
Cost Accounting Cost accounting specifically refers to collection, classification and ascertainment of the cost of items produced or services rendered by the business.

Examples include:

  • Determination of material, labour rates per unit
  • Job costing (determination of costs related to a specific project)
  • Process costing (determines cost per unit of finished and in-process units at end of a particular process)
  • Determination of overhead absorption rates
  • Standard costing/ Variance analysis (comparison of actual vs budgeted)
Management Accounting It relates to the use and analysis of data collected through financial accounting and cost accounting for the purpose of decision making, option analysis and strategy formulation etc.

Examples include:

  • Breakeven analysis
  • Cost Volume Profit (CVP) Analysis (explains relationship between cost, sale volume and profit)
  • Cost analysis for decision making (e.g. Make or Buy decisions, Repair or Replace decision, Learning curve analysis for determination of labour cost for next project etc.)

One thought on “Branches of Accounting”

  1. Yiimp Pool says:

    good article very hopeful

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