Three Branches of Accounting

Before discussing what are the three branches of Accounting? let me tell you the definition. According to Wikipedia,  Accounting usually generates financial statements which reveal in money terms the economic resources under the control of management; selecting information which is appropriate and representing it faithfully.

Today, it is referred to as “the language of business” since it is the vehicle for reporting financial information pertaining to a business entity to numerous different categories of people.

According to Wikipedia, branches of accounting are: Financial, Management, Cost, Tax, Forensic and Public Sector.

Following are the Main Three Branches of Accounting

1. Financial accounting: It is intended for outsiders (persons apart from owners and managers). There are several uses of Financial accountancy. It is worried about the recording of business transactions and the periodic preparation of income statement, balance sheet and cash flow statement from these types of records. In this way, it is perfect for determining profit or loss made during a given period and financial position by the end of the given period as well as the sources and uses of cash for the year. Financial accountancy is controlled by both local and international standards.
2. Management accounting: It is focused on the interpretation of accounting information to help the management in future planning, decision making, control, etc. Management accountancy, for that reason, serves the information requirements of the insiders, e.g., owners, managers and employees. Within the division of management accountancy you will find nearly enormous quantities of tools, methods, techniques and approaches floating around.
3. Cost accounting: It is a useful tool you utilize to cut back and eliminate costs in a business. This has been developed to determine the costs incurred for carrying out different business activities and to assist the management to exercise strict cost control. Considering that managers are making decisions just for their own firm, there’s no need for the information to be comparable to similar information from other businesses. Rather, information should be suitable for a specific environment.

Other Branches

Tax: This branch of accounting continues to grow as a result of the difficult tax laws which include income tax, sales tax, excise duties, custom duties, etc. An accountant is needed to be fully conscious of various tax legislations.

Social accountancy: It focuses on the idea of corporate accountability. This is also identified as social reporting or social responsibility accounting. It reveals the social benefits created and the costs suffered by the enterprise. Social benefits consist of such facilities as medical, housing, education, canteen, provident fund, etc. while the social costs range from such matters as extra hours worked by employees without payment, environment pollution, unreasonable terminations, etc. Social accountancy is frequently utilized as an umbrella term to explain a large field of research and practice.

Watch a video on Different Branches of Accounting

Human resource accounting: This branch is interested in the human resources of the enterprise. Accountancy methods are utilized to assess the human resources in money terms so that the society may judge the total work of the business enterprises which includes its non – human net assets. Therefore, it is for the people of the organisation. HRA helps to keep track of the use of human resources by the management.

National: This in essence means the accounting for the resources of the nation in its entirety. It is generally not focused on the accountancy of individual business entities and is not based on generally accepted accountancy principles.

It is not possible to describe different types of accounting in detail here. If something is missing please post in the comments section, we will try to update the information related to various areas of accounting.