Read this targeted article to learn about the scope, objectives, functions, branches, and types of accounting…
Scope of Accounting:
The activity of accounting starts where the work of book-keeping ends. From this point of view, the following are the scope of accounting…
1. To verify and test the entries in book-keeping.
2. To test the total and balances amount of ledger.
3. To prepare a trial balance from the ledger.
4. To prepare various final accounts like trading account, manufacturing account, profit and loss account, and balance sheet.
5. To disclose adjustments.
6. To rectify errors.
7. To check out conclusions on the basis of an analysis of financial adjustments and statements.
Objectives of Accounting:
The objectives of accounting can be categorized into two different categories like:
(i) Main Objectives.
(ii) Other Objectives.
1. Main Objectives:
(i) To know the profit and loss of a business organization.
(ii) To know the value of assets and liabilities of the business at a particular date.
(iii) To know about the growth and downfall of the business.
(iv) To know as to what amount is to be paid to a particular individual what amount is to be received from a particular person on a particular date.
(v) In the case of the companies to observe with the provisions of the Companies Act, 1956 as under this act it is important for the companies to maintain accounting record.
2. Other Objectives:
(i) To know the position of cash.
(ii) To know about the position of goods and their stocks.
(iii) To know about the frauds and errors committed by the employees.
(iv) To have proper information about capital employed in the business or company.
(v) To satisfy the taxation authorities.
(vi) To know the requirements like financial and non-financial of business at a particular time.
Functions of Accounting:
The basic list of functions of accounting in an organization will be classified as:
1. Constructive Functions:
The primary language of any business is an accounting. Under this function of the accounting business, transactions and financial aspects are classified and converted into final accounts, deleting the economic records, and rectifying the errors.
2. Recording Functions:
Under this function of accounts Trial balance, Trading account, Manufacturing account, Profit and Loss account and Balance Sheet are prepared.
3. Auditive Functions:
This function of accounting is to testify the legal accounts of books, to check the mandatory accounts and audit the final book of accounts to find out omissions or errors and as well as frauds.
4. Interpretative Functions:
This function of accounts is to prepare economic reports and financial statements. For this Ratio Analysis, Fund Flow Statement, Cash Flow Statement, etc., are prepared.
5. Informative Functions:
The informative function of accounts is to provide accounting information to users who analyze or interpret them as per their individual needs. The information is organized or prepared on the basis of financial statements and final accounts.
6. Legal Functions:
This function of accounts covers the preparation of necessary accounts for the object of Income Tax authorities and the computation of tax according to the form of the Income Tax Act.
7. Managerial Functions:
The managerial function of accounting contains preparation of managerial information on the basis of economic reports and financial statements.
8. Social Functions:
Social function is a type of responsibility of accounting is to disclose financial results for the benefit of creditors, investors, and society as a whole.
Branches or Types of Accounting:
The main or various branches of accounting are also known as types of accounting. It includes various points such as:
1. Financial Accounting:
An accounting which relates to the recording and analysis of transactions of financial nature, their preparation, their classification of financial statements and their interpretation and analysis is termed as financial accounting.
2. Management Accounting:
The accounting which is prepared exclusively for the use of management is known as the management accounting. Management prepares budgets and plans on the basis of this accounting.
3. Cost Accounting:
The accounting which helps in the determination of total cost and cost per unit of goods and services is called cost accounting. It helps in cost reduction and cost control.
4. Tax Accounting:
The accounting which is used for tax motives or purposes is called tax accounting. Sales tax, Income tax, and indirect tax are calculated on the basis of this accounting.
5. Government Accounting:
These accounts are maintained by the central government, state government, and local governments are called government accounts and the system of recording is called government accounting.
6. Human Resource Accounting:
Accounting which is mainly related to a human resource is called human resource accounting. Values and costs of human resources are recorded and summarize in this accounting system. It is of enormous use for a business organization.
7. Social Responsibility Accounting:
Social responsibility accounting help to deals with measuring, identifying, and communicating social activities carried out by the entity for the advantage of various segments of the society.
8. Environment Accounting:
Accounting for environment and ecology preservation is a segment of environmental accounting. It deals with the accounting of pollution, natural resources, and prevention.
Finally, these are the proper explanation on the topic of scope, objectives, functions, branches, and types of accounting…