Branches of Accounting
Table of Content:
🔹 Branches of Accounting
Accounting has several branches, but they can broadly be grouped into External and Internal branches depending on who uses the information.
✅ 1. External Branches of Accounting
These are mainly for outsiders like investors, creditors, government, regulators, etc.
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Financial Accounting
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Records all transactions and prepares financial statements (Balance Sheet, P&L, Cash Flow).
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Provides information about the overall financial position and performance.
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Cost Accounting (partly internal, but also external for pricing/valuation)
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Deals with cost calculation of products/services.
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Helps in inventory valuation and pricing decisions.
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✅ 2. Internal Branches of Accounting
These are mainly for internal management to plan, control, and make decisions.
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Management Accounting
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Provides reports, budgets, forecasts for managers.
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Helps in decision-making, performance evaluation, and strategy.
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Cost Accounting (also used internally)
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Breaks down costs to control efficiency and reduce waste.
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🔹 Summary Table
| Type | Branch | Users | Purpose |
|---|---|---|---|
| External | Financial Accounting | Investors, Creditors, Govt. | To show financial position and results |
| Cost Accounting (part) | Regulators, Pricing bodies | To determine cost and inventory valuation | |
| Internal | Management Accounting | Managers, Executives | For decision making and control |
| Cost Accounting (part) | Internal departments | For efficiency, cost control |
✅ So, in short:
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External Accounting → Financial Accounting (focus on outsiders).
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Internal Accounting → Management Accounting (focus on managers).
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Cost Accounting → Supports both (internal + sometimes external).