(a) Describe various branches of accounting.
(b) The management of ABC Ltd. changed the depreciation method for the last three years. Which principle is not followed?
(a) Describe various branches of accounting.
(b) The management of ABC Ltd. changed the depreciation method for the last three years. Which principle is not followed?
(a) Following are three branches of accounting :
(i) Financial Accounting: Financial accounting is the accounting for revenues, expenses, assets, and liabilities that are commonly carried on in a business. Financial accounting involves the preparation of financial reports which provide summaries of a firm's financial condition. The main objective of financial accounting is to prepare the Profit and Loss Account (Income Statement) and the Balance Sheet.
(ii) Cost Accounting: Cost accounting deals with the classification, recording, allocation, summarization, and reporting of current and prospective costs involved. The main purpose of cost accounting is to ascertain the cost of production, to enable the management to fix the price of the product and to ensure cost reduction.
(iii) Management Accounting: "Management accounting is the application of professional information in such a way as to assist the management in the formation of policies and in the planning and control of the operations of the undertaking." The main purpose of management accounting is, therefore, to provide all the information to the management for making policy decisions.
(b) The principle of Consistency is not followed.
(a) Following are three branches of accounting :
(i) Financial Accounting: Financial accounting is the accounting for revenues, expenses, assets, and liabilities that are commonly carried on in a business. Financial accounting involves the preparation of financial reports which provide summaries of a firm's financial condition. The main objective of financial accounting is to prepare the Profit and Loss Account (Income Statement) and the Balance Sheet.
(ii) Cost Accounting: Cost accounting deals with the classification, recording, allocation, summarization, and reporting of current and prospective costs involved. The main purpose of cost accounting is to ascertain the cost of production, to enable the management to fix the price of the product and to ensure cost reduction.
(iii) Management Accounting: "Management accounting is the application of professional information in such a way as to assist the management in the formation of policies and in the planning and control of the operations of the undertaking." The main purpose of management accounting is, therefore, to provide all the information to the management for making policy decisions.
(b) The principle of Consistency is not followed.
