Sub Fields of Accounting
Accounting is a broad expression and includes many other subfields under it. However, the sub-fields consist of financial accounting, human resource accounting, cost accounting, management accounting and social responsibility accounting. Let us take them in brief:
Financial accounting to a great extent worries about the planning and elucidation of financial statements and records of an organization. It is designed in a way to provide financial information to the user for instance investors, tax authorities, creditors and so on. This begins with the book-keeping process.
In our previous article, we stated that financial accounting has a historical function. It just records and summarizes them after they have effectively occurred. Furthermore, the last step of financial accounting is to arrange the final record that is Profit and Loss Statement (Income Statement) and the Balance Sheet. Profit and loss statement and the balance sheet is made at the end of the financial year to know the profitability of an organization. Likewise, it also provides the financial position of the organization at the year-end to determine the gap.
Double entry system of bookkeeping is normally used in financial accounting. To maintain the accounting record it uses the Accounting Standards (AS). Different accounting procedures are utilized to keep up these financial records by means of a journal, ledger, trial balance and so forth. A definitive point is to give the user of an organization to provide with all the financial data they may require in a reasonable and orderly way.
Simply put, management accounting takes such accounting data into consideration which is valuable to the management. This accounting information may include reports, accounts, budget and so on. This is helpful to the management to carry out its day to day functions such as planning, controlling etc., more effectively and efficiently.
In management accounting, the data is categorized and sorted out in a manner to cater to the needs of its users such as managers or shareholders. Thus making the data more obvious and dissect for the users. Along these lines, they can carry out their managerial plans and decisions in a better way.
Moreover, the diverse management level has distinctive necessities. So one of the principal elements of management accounting is to alter the information as per the requirements of the top, middle and lower management level. For instance, the top level supervisors will require progressively compact data while the lower level supervisors will require more comprehensive data.
It is a type of accounting that is related to the cost ascertainment of an item or occupation or activity. In addition to this, cost accounting ensures that the right amount of cost is used by the organization to items/occupations/activities. What’s more, cost accounting also sorts out and shows this financial data in a suitable manner to the management.
Moreover, cost accounting takes care of the three parts that are cost determination, cost control and cost reduction. This will help the management in the following ways:
- Avoiding wastage or in other words efficient utilization of the resources available
- Deciding the selling cost of a good or a service
- Ascertaining the break-even point and
- Better decision making
Cost accounting is likewise significant for planning and actualizing budgetary control for the organization.
Human Resource Accounting
Human resources are contended to be the most significant resources of an association. Without human resources, an organization basically can’t work. Howsoever, in the regular type of accounting, there is no approach to determine their costs and advantages. Human Resource Accounting was an idea created in the 1960s that planned to change that old-school approach.
The most fundamental human resource accounting objective is to decide the recruiting or selection, training, developing and retaining the organization’s human resources. It can even accommodate the thankfulness or the deterioration of human resources. This will essentially enable the administration to screen its employees’ adequacy and proficiency. What’s more, since the data is accessible, they can settle on better choices with respect to their human resources.
Throughout the years’ bookkeepers have thought of numerous strategies for Human Resource Accounting like the historical cost, opportunity cost, replacement cost, present value method and so forth. All these have their very own advantages and constraints, and the association will pick the one most appropriate to them.
Social Responsibility Accounting
It is almost impossible for an organization to sustain in a vacuum being a part of society and economy. Truth be told, each organization profits by the society by utilizing its resources whether it is an input or human resource. So an organization ought to likewise take responsibility of such society and must make some contribution towards it.
So social accounting plays a very important role as it helps in determining the social contribution costs of the organization. It is one of the manners through which an organization can educate about the welfare activities and the advantage of such activities to the general public. It endeavours to express the welfare of an organization’s social projects in quantifiable terms.