Introduction to Accounting and Branches of Accounting

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Introduction to Accounting

Why do people say that starting off a business and carrying it on a profitable note is quite a difficult feat? Speaking on general note, the basic fundamental of carrying out any successful business venture is to earn maximum profits, by buying a certain product at specific rate and selling it off to another customer at comparatively higher rate. Another mode of carrying on a business venture is to accumulate raw materials, create any product and sell it off to a customer at a price that would accommodate total production price and still manage a profit margin.

However, there are a number of aspects that needs to be taken into consideration when dealing with any business venture. It may so happen that during the operation of the venture, the tastes of people may change, and that may result in loss of a business venture. Another reason for such loss may be the entry of competitors in that domain that results in declination of sales and on the whole reduction in profit.

Whatever be the scenario, it is imperative for a businessman to be aware of his profit and loss margins at a consolidated level for understanding the status of his venture and planning further in regards to that. However, for this initial planning and further decision making and planning of ventures, a consolidated summary is required.

To ensure that a businessman gets his data recorded in correct manner, detailed Accounting system is required.

Accounting: Defining the details:

As per the definition provided by The American Institute of Certified Public Accountants in 1941, Accountancy is the specific art of recording, classifying and summarizing the basic terms of transaction of monetary units and those associated with any manner of financial character, in a specialized manner and interpreting the results in regards to that.

Explaining this on a detailed note, it can be stated that, based on this record of classifying and analyzing of business transactions certain business concerns can be understood in a detailed manner and further decisions can be taken.

Clearly, detailed presentation of such business transactions is a must for any business venture to function in an organized manner.

Role of Accounting in business ventures:

A detailed Accounting system provides us with following tasks:

  • It helps in presenting monetary transaction records in a tabular format that enables in preparing detailed accounts without a hassle.
  • This recorded data can be used in the face of any legal dispute such as income tax and sales tax issues.
  • This is extremely essential for protecting properties that are associated with business ventures.
  • There are numerous parties who would prefer to have a look at the data such as debtors, government officials, investors, and creditors. A classified format is the best!

Hence, Accounting truly has its place in every business venture. If you need assistance with accounting homework? Click here and take help from our accounting homework tutor.

Branches of Accounting

Introduction to accounting and branches of accounting

For any business venture to gain success, it is important to have tabulated format of financial transactions that is formally known as Accounting. It is based on this financial structure that a company’s financial status can be determined.

Prior to getting to core of this subject, it is important to know branches of Accounting and specific details associated with them. It can be branched into:

  1. Financial Accounting
  2. Cost Accounting
  3. Management Accounting

It is under these subheads that a final tabulation is made.

Understanding the various branches of Accountancy:

Here is a detailed study of the facets associated with this subject.

  1. Financial Accounting:

As per the American Institute of Certified Public Accountants, Financial Accounting is termed to be an art that is significantly associated with recording, classifying as well as summarizing in terms of monetary transactions those aspects that are associated with financial character and thereby interpreting them.

It is based on these that a final financial statement is prepared, and within this accounting period, corrective measures can be taken. Since the basis of setting up a business is to incur a certain amount of profit; hence, it is important that a tab is kept on profit and loss amount.

These amounts are taken up on an annual period; hence balance sheet is prepared on a specific date.

  1. Cost Accounting

In this case, those costs are recorded that are incurred in business with aim of improving its management. The result of this is specifically used in determining course of action associated with capability and cost efficiency of a firm.

With the help of this, a cost corrective measure can be undertaken, where a firm would be able to plan for its future and keep a check on its current operations.

  1. Management Accounting

This is a financial data that is to be used by a company in regards to development of its business. Management Accounting deals with various aspects simultaneously such as budgetary control, inventory control and cost accounting.

Thus, it is imperative that while you are studying Accountancy, you must have a detailed knowledge of branches of this subject.

 

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