The economic development and technological advancements have resulted in an increase in the scale of operations and the advent of the company form of business organisation. This has made the management function more and more complex and increased the importance of accounting information. This gave rise to special branches of accounting. These are briefly explained below :
Financial accounting: The purpose of this branch of accounting is to keep a record of all financial transactions so that:
- the profit earned or loss sustained by the business during an accounting period
can be worked out,
- the financial position of the business as at the end of the accounting period
can be ascertained, and
- the financial information required by the management and other interested
parties can be provided.
Cost Accounting: The purpose of cost accounting is to analyse the expenditure so as to ascertain the cost of various products manufactured by the firm and fix the prices. It also helps in controlling the costs and providing necessary costing information to management for decision-making.
Management Accounting: The purpose of management accounting is to assist the management in making rational policy decisions and to evaluate the impact of its decisions and actions.