The Five (5) Branches of Accounting
Accounting as a form of knowledge and profession consist of different branches as explained below.
1. Financial Accounting
Financial accounting started from stewardship duty and is concerned with the keeping of books of accounts and preparation of financial statements for the entire organization on a historical basis. The reports prepared by a financial accountant are both for internal and external use.
The financial statement prepared through financial accounting is to ascertain the profit or loss of an organization during a particular period. Financial accounting is also used to determine the financial position of an organization which shows the company’s assets and liabilities at a particular date.
2. Cost Accounting
Cost accounting is a branch of accounting that is concerned with how to find out the cost of goods produced or services rendered in an organization. It also helps organizations in controlling and minimize their costs.
Financial accounting and cost accounting principles and techniques are applied to ascertain and control cost to determine I increase the and/or reduction between budgeted cost and actual cost for management planning, control, and decision-making
Read Also: Definition and Benefits of a Money Market Account
Cost accounting also includes the use of accounting double-entry bookkeeping methods to ascertain the cost. This is accomplished through the collection of cost data in an organized pattern from accounting information systems.
3. Management Accounting
Management accounting is a branch of accounting that uses different quantitative analysis tools to project the future of an organization. It is the provision of timely and reliable information for planning, control, and decision-making by the organization’s management.
Management accounting is also referred to as managerial accounting because this branch of accounting provides information for organization management to take decisions and effect controls.
4. Auditing
Auditing is an independent examination of the books of accounts, records and financial statements of an organization by an independent person called an auditor.
Auditing is a branch of accounting because the role of an auditor is performed by accounting professionals who choose to be an auditor instead of a financial accountant, cost accountant, or management accountant.
The auditing of a company’s financial records and accounts is to ensure that complete and reliable financial statements are published or released to the public by companies so that creditors, government, investors, and other users can rely on it for decision-making.
The auditor is expected to form an independent opinion on the audited financial statement after gathering various forms of audit evidence from the audit exercise. The auditor’s report should show the ‘true and fair view of the financial statements audited and the scope of work carried out.
Read Also: What is Money and Characteristics of Money
5. Public Sector Accounting
Public sector accounting refers to accounting services carried out at the local, state, and federal government ministries and parastatals. It is a class of accounting that is prepared in compliance with the laws regulating government finances.
It is also called government accounting because the government has some executive responsibility over it. It is the process of recognizing and recording government-generated revenue and disbursed expenditure in the appropriate books of accounts.
It involves accurate book- keeping, records, measuring and interpreting the financial results of the business by the preparation of accounting ratios and communicating these results to management and other interested parties or users.
In summary, accounting includes the collection, recording, presenting, analysis, and interpretation of financial information for the users of financial statements.
Accounting has the nature of profession, science, language, service activity, and information systems. The branches of accounting include financial accounting, cost accounting, auditing, public sector accounting, and managerial accounting.
Read Also: The Scope and Five (5) Natures of Accounting
