Branches of Accounting

financial accounting

Cost Accounting

The object of cost accounting is to find out the cost of goods produced or services rendered by a business. It also helps the business in controlling the costs by indicating avoidable losses and wastes.Management AccountingThe object of management accounting is to supply relevant knowledge at appropriate time to the management to enable it to take decision and effect control.In this web primer, they are concerned only with financial accounting. The objects of financial accounting as said above can be achieved only by recording the financial transactions in a systematic manner according to a set of principles. The recorded knowledge has to be classified, analyzed and introduced in a manner in which business results and financial position can be ascertained.

Makes use of of Accounting

Accounting plays important and useful role by developing the knowledge for providing answers to plenty of questions faced by the users of accounting knowledge.

(two) Has the business activity resulted in a profit or loss?

(one) How lovely or bad is the financial condition of the business?

(three) How well the different departments of the business have performed historically?
financial accounting

(four) Which activities or products have been profitable?

(five) Out of the existing products which ought to be discontinued and the production of which commodities ought to be increased.

(6) Whether to buy a part from the market or to manufacture the same?

(7) Whether the cost of production is reasonable or excessive?

(8) What has been the impact of existing policies on the profitability of the business?

(9) What are the likely results of new owner decisions on future earning capacity of the business?

(ten) In the light of past performance of the business the way it ought to plan for future to make definite desired results ?

Above mentioned are few examples of the categories of questions faced by the users of accounting knowledge. These can be satisfactorily answered with the help of suitable and necessary knowledge provided by accounting.
financial accounting

Besides, accounting is also useful in the following respects :-

(two) Accounting record, prepared on the basis of uniform practices, will enable a business to compare results of period with another period.

(one) Increased volume of business ends in large number of transactions and no businessman can keep in mind everything. Accounting records obviate the necessity of recalling various transactions.

(four) Cocooning records, backed up by proper and authenticated vouchers are lovely facts in a court of law.

(three) Taxation authorities (both income tax and sales tax) are likely to think the facts contained in the set of accounting books if maintained according to usually accepted accounting principles.

financial accounting

(five) If a business is to be sold as a going concern then the values of different assets as shown by the balance sheet helps in bargaining proper cost for the business.