Introduction to branches of Accounting
Accounting is an important concept that its history can be traced back centuries ago. Many businesses, based on numerous transactions made in a day requires accountability and proper records keeping for such in information in order to enhance other activities within a business enterprise such as communication. With the absence of accounting for businesses, this would act as a stabling block for the attainment of organizational objectives such as profit maximization as management of resources requires proper innovative structures for accountability.
According to Dyson (2004) the accounting branches can be segregated into three key areas; financial, cost, tax and managerial accounting (Dyson, 2004, p.12). Accounting plays a significant role in different business enterprises especially on key areas such decision-making, giving information, protection of business from various transactions involved with other business environments and explaining the business position. Financial Accounting is the art of managing business financial recording that stipulates the business position and it progress in growth through the analysis of profits and losses.
According to Babarinde (2003) financial accounting is a system that deals with explaining the situation and the state of affairs for businesses through preparation of financial statements such as the balance sheet and trade and profit loss account (Babarinde, 2003 p. 313). Financial accounting also plays a significant role in running a business enterprise as the system give the estimates of costs on products, functions, activities and the firm progress. Through financial management in a business entity can get quality information to plan through budgeting that gives estimates on expected expenditures.
Cost accounting is the system used in controlling activities of production that would regulate expenditures for the business in order to enhance profit maximization. According to Abeygunasekera and Fonseka (2013) every business has its control system that helps in cutting cost either through the production processes such as manufacturing, recruitment, training and development and delivery of services. Through such processes, cost accounting acts a system for the management to control such expenditures incurred through transactions with different business environments as well as in the processes of availing goods and services to consumers (Abeygunasekera and Fonseka, 2013).
Managerial accounting is the process that facilitates the management with information concerning the company’s progress that enhances the management in carrying out their day to day functions. The management in every business ought to have the facts in decision-making, planning, and in the development of policies and through managerial accounting such is facilitated. According to Mbroh (2013) he argued that in managerial accounting, frequent information is made obtainable to the management such as information on funds, profit and cost that gives a bulge of the business advancement and must be factual in support of truth and fairness (Mbroh, 2013).
Recommended accounting methodology for companies
It is necessary for the management of any business to how commitment in recording business transactions as this information can be retrieved for further use when such information is required. There are for instance methods of accounting that are commonly used across bossiness in the world of today. This includes the single entry and doubles entry methods that are used interchangeably in businesses. Use of double entry techniques has proved to have various advantages for many that use it. In the double entry, two columns are created for transaction entries in both what the company receives and also spends while running the business.
By following the right procedures in preparation of journals, trial balance, and final account, the use of the double entry techniques businesses benefits in different ways that is recommendable. Through such a system, the management is also to create the accounting book through a device known as the trial balance that give more accurate inform about the business transaction.
It is also easier to ascertain on the profits and losses incurred by a business if the transaction entries are properly entered in the trial balance device. According to Mbroh (2013) he also argued that a financial statement such as the balance sheet, the system gives accurate information concerning the position of the business enterprise (Mbroh, 2013). The management is also able to know if the firm has made any development such as profit maximization and growth. This as well regulates spaces for errors as the transaction entries in both the debit and the credit side should balance in the system. Through the double entry system, the management is also able to carry out a comparison study during a specific period such as between two consecutive years. It also becomes easier in making decisions for the business as the business position is made clear for instance in the trade and profit loss accounts.
Abeygunasekera, A.W.J.C and Fonseka, A. T (2013) Non-Compliance with Standard Practices by Small and Medium Scale Enterprises in Sri Lanka.
Babarinde A. (2003) Financial Accounting, Volume 1, Lagos: JBA Associates Ltd.
Dyson J. R (2004) Accounting For Non-Accounting Students, 6th Ed. Financial Times/ Pitman Publishing Imprint, England.
Mbroh, (2013) Control Systems Practiced By Small and Micro Enterprise Owners within the Cape Coast Metropolitan Area of Ghana in Asian Journal of Business and Management Sciences Vol. 1 No. 9 [28-47]