The three main branches of accounting are cost accounting, financial accounting and management accounting, and they have been developed in order to deal with different kinds of objectives.
• Cost accounting
Cost accounting is used to determine the cost of materials, tools and equipment in order to help management make informed decisions and to be able to control the cost of the end product.
• Financial accounting
This is the original form of any accounting and is confined, in the main, to preparing financial statements that will satisfy outside agencies such as banks and other financial institutions, creditors and, of course, the IRS.
The primary purpose of financial accounting is to make it possible to calculate the profit or loss that has been made by the business during the year, and to be able to show the financial position of that business on any given date.
• Management accounting
This is also sometimes referred to as managerial accounting, and it gives essential information to the management team so that it is able to make decisions that are crucial to the running of the business, and also to be able to control pertinent activities.
• Accounting cycle
This is the sequence of events that are required within the accounting period, and they have to be repeated in the same order each time.
The first is the recording of all transactions as and when they occur. The second stage is classifying the entries in the correct ledger accounts so that information can be got from a glance.
The final stage is summarizing, which is to prepare the trial balance and the final accounts with the idea of discovering the profit or loss made within a trading period.
• Cost accounting
Cost accounting is used to determine the cost of materials, tools and equipment in order to help management make informed decisions and to be able to control the cost of the end product.
• Financial accounting
This is the original form of any accounting and is confined, in the main, to preparing financial statements that will satisfy outside agencies such as banks and other financial institutions, creditors and, of course, the IRS.
The primary purpose of financial accounting is to make it possible to calculate the profit or loss that has been made by the business during the year, and to be able to show the financial position of that business on any given date.
• Management accounting
This is also sometimes referred to as managerial accounting, and it gives essential information to the management team so that it is able to make decisions that are crucial to the running of the business, and also to be able to control pertinent activities.
• Accounting cycle
This is the sequence of events that are required within the accounting period, and they have to be repeated in the same order each time.
The first is the recording of all transactions as and when they occur. The second stage is classifying the entries in the correct ledger accounts so that information can be got from a glance.
The final stage is summarizing, which is to prepare the trial balance and the final accounts with the idea of discovering the profit or loss made within a trading period.
