12 Branches Of Accounting

branch of accounting

The person who performs the work of audit is known as auditor. In accounting and business, there are two types of auditing – external auditing and internal auditing.

branch of accounting

It not only removes confusion but also provide consistency and uniformity in the process. These are the fundamental assumptions, on which the entire system of accounting is based. Revenue is registered when it is paid, not when money is received, in accrual accounting. Revenue is registered in the books even though the client has not yet paid. Cash and accrual accounting are the two forms of accounting methods.

FreshBooks has simple online accounting software for small businesses. Internal auditing involves evaluating how a business divides up accounting duties.

Branch Accounting System Example

These accountants have the responsibility to monitor the use of money instead of its amount. The rules of GAAP are not necessary to follow in managerial accounting and are a point of focus in the needs of management. The CIMA has prepared a set of accounting principles which are called Global Management Accounting Principles . Fiduciary or Trust accounting is an accounting branch that specifically deals with accounting for trust or estate entity and issuing periodic reports on the status of the entity. Trusts are vehicles used for the control and operation of assets and businesses that have separate legal status from their owners. They are used to maintain control of assets and pass on the benefits without passing on ownership of the assets contained therein.

When people ask what accountants do, they always discuss jobs like tax agents and independent auditors. The several roles performed by skilled accountants who work in companies are often overlooked and misunderstood. It becomes mandatory to provide reports from the external auditor in the case of a business entity where the management is legally excluded from the ownership. It entails the preparation of tax returns as well as the analysis of the tax implications of potential business transactions.

The 12 Branches Of Accounting: Their Uses And How They Work

Financial accounting analyses the company’s balance sheet and prepares profit and loss statements that advise management or stakeholders in regards to loans, investments, or acquisitions. It revolves around recording and clarifying business transactions alongside the preparation and presentation of the company’s financial statements.

  • This area of accounting is concerned with the management of property for the benefit of another person or business.
  • You may understand it as a subset of management accounting that gives full attention to the evaluation of costs.
  • The whole process of cost accounting is based on the information provided by the financial accounting.
  • C) Under conventional accounting, certain standards are accepted commonly, which is not possible under this method.
  • It also involves measuring the economic value of people to the organization’.
  • Revenue is recorded in accrual accounting when it is earned, not when money is received.
  • An independent branch maintains all of its own finances and is able to independently determine its revenue, expenditures, assets, and liabilities.

Information included in the financial statements greatly influences the decisions made by the users. Because of this, there seems to be a conflict of interest between the users and the source of the financial statements. Even though management reports do not follow https://accounting-services.net/ the requirements imposed by accounting standards like the PFRS and PAS, management accountants are still expected to follow the CIMA code of ethics. It is done by an individual independent of/from outside the organisation appointed by the owners of the resources.

Technically speaking, in bookkeeping terms, the branch account is a temporary or nominal ledger account. At the period’s end, the branch tallies up its figures and arrives at ending balances, which are then transferred to the appropriate head office or head department accounts. The branch account is left with a zero balance until the accounting process begins all over again with the next accounting period or cycle. Branch accounting is a bookkeeping system in which separate accounts are maintained for each branch or operating location of an organization. Project accounting is a component of overall project management.

Common Branches Of Accounting

Because of the disparity in needs among various groups of users, different types or branches of accounting have emerged to serve the needs of management and other users. Financial accounting is primarily concerned with providing of financial information of the business enterprise branch of accounting to all its stakeholders. The notable upsides of branch accounting include optimized accountability and control, as the profitability and efficiency of different branches are adeptly monitored in this. In debtors system, branch accounting is done in the form of a debtor account.

In order to ascertain the profit or loss made by each department, it will be advisable to prepare separately trading and profit & loss account of each department at the end of the accounting year. Therefore, it includes cost accounting which keeps accounts pertaining to cost and makes available the analysis of various information related to cost. There is a chance of mismanagement in this accounting system because of decentralized operation and minimum control of the head office. Other expensesOther expenses comprise all the non-operating costs incurred for the supporting business operations. Such payments like rent, insurance and taxes have no direct connection with the mainstream business activities.


Under fiduciary accounting, those accounts are handled and entrusted to the person who takes care of the property’s custody and management. These accountants are responsible for tracking and reporting receipts and disbursements from accounts to ensure proper allocations of funds. For example, the reports and records can be analyzed by a financial accountant to check the previous quarter’s performance and make the required changes in the next quarter. This is helpful in analyzing the balance sheet and preparing the P&L Account.

It is a system where separate books of accounts are maintained for each branch. Here, the head office sends goods at invoice price, which includes a profit of 20% on invoice price and all branch expenses paid by HO. To ascertain the branch profit, adjustments will have to be made in branch A/c, which is a difference between invoice price and cost price. #2 – Cash Remitted by Branch to Head Office – If the branch office remits cash of $500 to head office. #1 – Inventory – If the head office transferred inventory of $1,000 to its branch office, the journal entries below would be passed into the head office books. Cash AccountingCash Accounting is an accounting methodology that registers revenues when they are received & expenditures when they are paid in the given period, thereby aiming at cash inflows & outflows. Here in this blog, you have learned about the branches of accounting.

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Cost accounting is a process of determining, collecting, analyzing, summarizing and evaluating costs to enable various alternative courses of action. A cost is expendure incurred in producing a good or providing a service.

It is a specially designed accounting system that prepares financial reports at appropriate time intervals to track the financial progress of a project. These reports provide vital information to project managers in performing their project management function.

branch of accounting

F) It can report on the performance of a department, product, process, unit, branch and the entire organisation. Being a geographically separate operating unit means the company incurs additional cost in infrastructure, manpower, administrative expenses, etc. In Branch Accounting, different methods will be used depending on the system of bookkeeping kept in each of the branches, or the nature of the branches.

History Of Branch Accounting

That said, small businesses usually aren’t required to use GAAP and its accrual method. Any business that makes, buys, or sells products must use GAAP, according to the IRS. But they are also well versed in International Financial Reporting Standards . Fiduciary accounting covers estate accounting, trust accounting, and receivership. This is the appointing of a custodian of a business’s assets during events such as bankruptcy. Determine the credibility of tax returns filled on behalf of a company. To provide specific recommendations for improving the operation of various branches.

Tax Accounting

With the rise of the free-market economic system, the value of this branch as a tool for achieving the primary goal of a company, profit, has grown exponentially. This branch covers the key aspects of cost estimation and control for decision-making, as well as control and assessment. Today, it is referred to as “the language of business” since it is the vehicle for reporting financial information pertaining to a business entity to numerous different categories of people.

In most countries, the auditor who certifies the accounts is the company’s statutory auditor. These auditors have to be at arm’s length distance with the company. This means they should not be able to get direct benefits from the company.

Management accounting is that part of accounting which is concerned with the decision making process of the management. Management accounting is not based on generally accepted accounting principles and is based on the whims of management. Management accounting is a tool for sound planning and effective controlling by the management. It helps the management for taking decisions in respect of ‘make or buy’, ‘shut-down point’, ‘fixing selling price of the product’ etc. This branch of auditing is used for examining and monitoring a business to have accurate reports financial records, financial integrity, and compliance with tax laws and regulations. External auditing and internal auditing are the two types of auditing that are used. There is an independent outside auditor hired for the auditing related to state or federal accounting.

What Are Accounting Branches?

Management accounting is a distinct accounting branch that provides information for management primarily for decision-making purposes. Management accounting is not a regulated accounting branch as it provides purely internal information however it is guided by accounting principles in the treatment of some items. Management accounting produces information for decision making and decision support systems for management such as break-even analysis, budgets and variance analysis. There are still differences between tax accounting and financial accounting . The discussion of such differences is not within the scope of this book. What is important to note is that tax accounting enables the taxing authorities to collect taxes that differ from the amount due computed using the financial accounting standards.