Based on the varied needs of its users accounting has evolved significantly. This evolution leads to the classification of accounting into different categories. Some different types of accounting are as follows;
- Financial Accounting
- Management Accounting
- Cost Accounting
Financial Accounting
This branch of accounting deals with the financial information requirements of the external users such as share-holders, creditors, Govt. agencies, etc. Financial accounting is historic in nature i.e. it represents the results of past events and transactions. The reporting formats of financial accounting are predefined and governed by different regulators, rules, principle and guidelines such as Generally Accepted Accounting Principle (GAAPs) and International Accounting Standards (IAS).
Management Accounting
Management accounting as obvious from the name is accounting for management. This branch of accounting deals with fulfillment of the information needs of internal business users. Top and middle management within the entity use management accounting as a tool for making strategic and tactical decisions and also for control activities. There are no specific formats for preparing reports of the management accounting. As these reports are meant for decision making and control activities therefor the management decides the format that suits best according to the situation and need. As these reports are for internal users therefor, are confidential, and usually not disclosed to external users like the reports of financial accounting.
Cost Accounting
Cost accounting is a type of management accounting. This branch of accounting deals with collecting cost information analyzing and preparing alternate cost models for the management to enable them choose the best suitable option. Cost accounting also helps management taking product pricing and economic order quantity (EOQ) decisions.
Author: Zuhair Afzaal
Studied Chartered Accountancy and now Pursuing Professional Career as Financial Consultant, Manager Accounts and Finance. A teacher by passion and likes to make things easier for students by publishing courses and lecturing in on-campus and online classes
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