Branches of Accounting evolved with various types of accounting information required by different class of users viz. owners, shareholders, management, creditors, suppliers, government authorities. Accounting evolved over period of time and is not confirmed itself only to Bookkeeping but spread it’s branches to the corners of economic activities.
Accounting can be divided into various areas of activities / categories. Each branch is a stream of study in itself and are covered in-depth separately. Let’s have quick overview:
It is an essential function which acts as a base for all the other branches of accounting. Book-keeping is primary recording of day-to-day transactions of the business. It also includes proper classifications of the transactions and further posting to general ledgers. (Read more)
It covers the preparation and interpretation of financial statements and communication to the users of accounts. Financial Accounting primarily covers calculation of profit or loss of the business during an accounting period and provide accurate picture of financial position as on a particular date. It includes preparation of Trial Balance, Income Statements (Profit & Loss Account), Balance Sheet / Statement of Affairs.
It covers the generation of accounting information for management decision purpose. Cost Control, Quality Control, Budgetary Control, Planning and so on are the main functions of the Management Accountant. Decision-Making Accounting and Cost Accounting can be termed as sub-branches of Management accounting as they serve the single and similar user group i.e. Management.
Auditing is an examination and verification of books of accounts and financial statements. Accuracy of business’s financial statement is crucial and is important to investors, tax authorities and various other users. Inaccurate financial statements may result in reputation loss and penalization by government agencies. Auditing includes Internal and External Audits.
Fund Accounting is applicable to non-profit organizations for keeping records of their funds. In such organization, funds are allocated to different causes or welfare schemes. Separate fund accounts are maintained to ensure the proper utilization.
As the name says, this branch of accounting is for Central or State governments. Government accounting is done budget allocations and utilization of such funds.Tax collections, computations of National Income, GDP etc are achieved through Government Accounting.
Forensic Accounting / Legal Accounting:
Forensic Accounting is also known as legal accounting. It involves computation of damages or gains or settling disputes in legal matters like litigation support and dispute resolution. To provide accurate damages or settling, Investigations are done and calculations are carried out. Use of such accounting can be seen in cases of matrimonial divorces or business insolvencies.
Fiduciary Accounting is the accounting and evaluation of a third party’s business and property maintained under the guardianship of another person.