There are following three main branches of accounting:
(2) Financial accounting.
(3) Managerial accounting.
Definition and Evolution of Bookkeeping:
Firstly accounting is related to recording of transactions. The process of recording transactions in the books is called “bookkeeping” as records are kept and stored in the books of accounts.
Bookkeeping has a history has a history which reaches back to the beginning of civilization, and archaeologists have found accounting records which date as far back as 4500 BC, well before the invention of money. Nevertheless, it was not until the fifteenth century that the principles of “double-entry” bookkeeping and other accounting procedures in use today for orderly recording of business transactions were introduced. Indeed, the modern day concepts and procedures have their origin in the practices employed by the merchants of the Italian City States during the early part of the Renaissance. The main principles of the “double-entry bookkeeping” were set out by LucusPacioli in his famous publication “Summa de Arithmetica, Geometrica, Proportioni et Proportionalita” which was published in 1494.
Definition, Evolution and Importance of Financial Accounting:
Secondly accounting is concerned with measuring, summarizing and presenting the data, recorded by bookkeepers in monetary terms, to the persons who need this information. This aspect of accounting is called “financial accounting”.
Financial accounting has its origins from the earliest times in the history of our society. Accounting is primarily concerned with providing information for internal and external users. Users of accounting information may be included management, lenders, customers, government, tax authorities, prospective investors, etc.
Financial information can only be provided if there is a proper system of recording transactions of the organization. This process of recording transactions is called bookkeeping. Initially, the records were hand written in the books however in recent times much of the work of a book keeper can be accomplished by the use of electronic and mechanical devices. Nonetheless both ways of recording information work on the same principles.
Accounting measures, summarize and then communicates the information recorded by book keepers in the form of accounting reports using acknowledged methods and techniques which may ultimately be used for decision making. The role of accountants is there for to supervise the bookkeepers.
The importance of accounting cannot be overemphasized as this is important for a business as fresh air for a human to exist. In the absence of a proper accounting system healthier survival of an organization would be at stake. This should also be remembered that the role of accounting is not only confined to business concerns but it is also useful for all classes and forms of organizations or individuals.
Definition of Managerial Accounting:
Accounting is linked with controlling what is happening within the organization. This is called “managerial accounting” as this branch of accounting helps the managers to control the ongoing activities and to make better decisions.