Kinds of accounting Essay Example | Topics and Well Written Essays - 500 words

Kinds of accounting - Essay Example The three major heads in which accounting is divided are financial accounting, managerial accounting and cost accounting. There are other kinds that have been developing as the world is progressing, but they all come under the three umbrellas one way or the other. For clarification and differentiation amongst the three major heads, a brief discussion is presented below (Peter, 2007). The basic purpose that financial accounting serves, is to provide the stakeholders with information to make sound economic decisions (Robert, 2004). Reports are made for the external parties such as the investors, creditors and tax authorities, so that they can extract information regarding how the company is doing. Reports include income statements, balance sheets, cash flow statements and other- they provide a complete picture for external parties to make sound decision and compare them with other organizations’ performances. They are guided by the Generally Accepted Accounting Principles (GAAP) (Robert, 2008). Managerial accounting is another major branch of accounting. It provides information that is crucial for the internal parties or the managers or employees, helping in understanding the running of the businesses. They provide information to the internal stakeholders that help them understanding the management and control functions within the organization. It is forward looking, that is, it is mostly based on projections and assumptions rather than the history of the organization. Management accounting is also termed as cost accounting, where product costing is also a part of managerial accounting. All these types of accounting that come under managerial accounting; help the managers make sound decisions about management and control of the organizational functions (Ray, 2008). Cost accounting comes under the umbrella of managerial accounting but serves a unique purpose. Cost accounting helps in budgeting, establishing the actual