Financial Accounting
Financial or traditional accounting consists of the classification,
recording, and analysis of the transactions of a business
in a subjective manner according to the nature of expenditure
so as to enable the presentation at periodic intervals, of
statements of profit or loss of the business and, on a specified
date, of its financial state of affairs. The day-to-day transactions
journalized or recorded in subsidiary books are posted in
the various ledgers and at the end of the accounting period,
a Profit and Loss Account and a Balance Sheet are prepared.
The emphasis is on the ascertainment and exhibition of the
profits earned or losses incurred by the business rather than
on the aspects of planning and control and decision making.
Financial accounting safeguards the interests of the business
and its proprietors and other connected with it by providing
suitable accounts and information to various parties, such
as the shareholders or partners, present and prospective creditors
and the Government. The accounts are kept in a manner so as
to meet the provisions of the Companies Act and to present
correct figures to income tax, excise and other authorities.
These accounts show how gainfully the resources of the business
were employed.
Management Accounting
Management accounting includes all those accounting services
by means of which assistance is rendered to the management
at all levels, in formulation of policy, fixation of plans,
control of their execution, and measurement of performance.
Management accounting is primarily concerned with the supply
of information which is useful to the management in decision
making for the efficient running of the business and thus,
in maximizing profit. Management account employs various techniques,
which include standard costing, budgetary control, marginal
costing, break-even and cost-volume-profit analysis, uniform
costing and inter-firm comparison, ratio accounting, internal
audit, and capital project assessment and control.
Social Responsibility Accounting
Social responsibility accounting is a new phase in the
development of accounting and owes its birth to increasing
social awareness, which has been particularly noticeable over
the last two decades or so. Social responsibility accounting
widens the scope of accounting by considering the social effects
of business decisions, in addition to the economic effects.
Several social scientists, statesmen and social workers all
over the world have been drawing the attention of their governments
and the people in their countries to the dangers posed to
environment and ecology by the unbridled industrial growth.
The role of business in society is increasingly coming under
greater scrutiny. The management is being held responsible
not only for efficient conduct of business as expressed in
profitability, but also for what it contributes to social
well being and progress. There is a growing feeling that the
concepts of growth and profit as measured in traditional balance
sheets and income statements are too narrow to reflect the
social responsibility aspects of a business.
Human Resource Accounting
It is another new field of accounting which seeks to report
and emphasize the importance of human resources in a company's
earnings. It is based on the fact that the only real long
lasting asset which an organization possesses is the quality
of the people working in it. This system of accounting is
concerned with " the process of identifying and measuring
data about human resources and communicating this information
to interested parties." |
Accounts
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