Accounting is divided mainly into three categories which include:
||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.
- 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 specifically refers to collection, classification and ascertainment of the cost of items produced or services rendered by the business.
- 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)
||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.
- 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.)