In this tutorial, we will learn about sub-fields of accounting is a system meant for measuring business activities, processing of information into reports, and making the findings available to decision-makers.
Accounting is a fairly broad term and encompasses many meanings and types of recording and analyzing activities. These various types of accounting are known as sub-fields of accounting.
The various sub-fields of accounting are:
It covers the preparation and interpretation of financial statements and communication to users of accounts. It is historical as it records transactions which already been occurred. The final step is to prepare a profit and loss account and balance sheet. It fundamentally helps determine the net result of an accounting period and the financial position on the given date.
Financial accounting primarily concerns itself with the preparation and interpretation of financial statements and accounts of a company. It is mainly aimed at providing external users with the financial information that they require. The process begins with bookkeeping.
May concerned with internal reporting to the managers of a business unit. To discharge functions of planning, controlling, and decision making, the management needs a variety of information. An essential component of the management accounting is cost accounting which deals with cost ascertainment and cost control. The different ways of grouping information and preparing reports as desired by managers for discharging their functions referred to as management accounting.
In management accounting, the information grouped and organized in a way desired by the managers who are the users of this information. So such reports, budgets, memos make the information easier to understand and analyze for the managers. Thus they can plan their managerial activities accordingly and make better and smarter decisions as well.
Institute of Cost and Management Accountants of England defines cost accounting as:
“ The process of accounting for cost which begins with the recording of income and expenditure or the bases on which it is calculated and ends with the preparation of periodical statements and reports for ascertaining and controlling costs.”
Cost accounting deals with all three aspects of cost ascertainment, the controlling of cost, and eventually, cost reduction. It will help the management avoid wastage, determine the selling price of a product/ service, calculate the break-even point, and overall better decision making functions. Cost accounting is also essential for budgeting and implementing budgetary control for the organization.
Social Responsibility Accounting:
The social responsibility accounting is concerned with accounting for social costs incurred by the enterprise and social benefits created. The demand for social responsibility accounting stems from increasing social awareness about the undesirable by-products of economic activities.
It is associated with determining the social costs of the company and the social benefits it contributed. It is one of the ways a company can inform the general public about the welfare activities the company does and the benefits of such actions to society. It attempts to express in quantitative terms the gain/welfare the company’s social program is causing to the community in general.
Human Resource Accounting:
Humans who are the most valuable assets in an enterprise are also accounts. Accounting is an attempt to identify, quantify, and report investments made in an organization’s human resources. It is an attempt to identify the quantity and report investments made in human resources of an organization that is not presently accounted for under conventional accounting practice.
One of the main objectives of human resource accounting is to determine the cost of recruiting, developing, training, and maintaining human resources. It can even provide for the appreciation or the depreciation of human resources. It will allow management to monitor the effectiveness and efficiency of their employees. And now that the information is available, they can make better decisions regarding their human resources.