Branches of accounting: Purpose and types

India’s accounting sector is expected to grow at a CAGR of 8.5% between 2023 and 2028, according to the IMARC Group. The growth reflects the rising need for able accountants who can handle financial records, ensure adherence to standards, and assist business decision-making.

Accounting is crucial for keeping financial transparency in business organizations, government units, and non-profit organizations. The profession has progressively developed special branches serving different functions. If you have ever wondered, “What are the branches of accounting, and what are their disparities?” then this is your piece.

Also read: Difference between accounting and accountancy

Different types of accounting and their purpose

Accounting is classified into multiple branches based on its function and stakeholders. Here are some of the main branches of accounting and their significance.

1. Financial accounting

This branch is concerned with the recording of financial transactions and the presentation of financial statements to external users such as investors, tax authorities, and other regulatory bodies like SEBI. In India, companies have to adhere strictly to the standards set by the Indian Accounting Standards and International Financial Reporting Standards (IFRS).

Key features of financial accounting include:

1. Preparation of financial statements like balance sheets, income statements, etc.
2. Assisting entities in complying with laws governing them, such as SEBI’s regulations on reporting requirements during public offers of securities.
3. Helping firms access capital while keeping operations transparent, among others.

2. Cost accounting

It is a vital tool used by businesses to establish the real cost of production. This makes it indispensable for manufacturing enterprises, retail shops, and small businesses in India. Cost accounting enables companies to set competitive prices while at the same time staying profitable.

How cost accounting operates includes:

1. Identification of direct and indirect costs involved in producing goods
2. Assists in reducing costs
3. Makes budgetary decisions effectively

3. Management accounting

This is used as an internal tool for decision-making. Indian firms depend on management accounting to analyze the financial performance, create budgets and improve operations.

4. Tax accounting

The main objectives of tax accounting thus embrace the following:

1. Complying with these regulations according to GST taxes
2. It includes means of saving taxes for individuals and corporations in general

5. Auditing

This is meant to promote financial transparency and accountability. Chartered Accountants in India appointed by the Institute of Chartered Accountants of India (ICAI) must carry out auditing in line with The Companies Act, 2013.

The findings are administered via various types of Audits, such as;

1. Internal audits — These help assess risks within the organization.
2. External audits — Performed by impartial auditors to confirm financial statements.

6. Forensic accounting

With an increase in India’s financial fraud cases, forensic accounting is becoming an important branch of accounting. It is critical in uncovering malpractice within financial transactions. It combines accounting methods, legal procedures, and investigative techniques.

7. Government accounting

Government accounting ensures the efficient management of public funds. The Comptroller and Auditor General of India (CAG) oversees government expenditures for transparency and accountability in the Indian context.

The primary purposes of government accounting in India include;

1. It tracks government revenues and expenditures.
2. Governmental units in the country ought to comply with regulations put in place when it comes to crediting public capital.
3. It helps improve financial accountability in government-sponsored projects.

8. Fund accounting

Fund accounting is used by non-profit government organizations (NGOs), educational institutions, and religious trusts in India. It ensures that funds get used according to their intended purposes.

Fund accounting operates on some central functions, including:

• Keeping separate records for different types of funds
• It helps in promoting transparency and accountability within financial management.

Start a career in accounting through Online Manipal

To establish yourself as an accountant, you first need to get a good base education in finance. Online Manipal offers UGC-entitled online degrees from prestigious educational institutions like Manipal University Jaipur (MUJ), Sikkim Manipal University (SMU) and Manipal Academy Of Higher Education (MAHE).

One worthwhile course you should consider enrolling in is the online BBA Finance & Accounting offered by Manipal University Jaipur (MUJ). It is designed to equip students with essential knowledge of finance and accounting, including financial management as well as corporate finance principles. One can also learn about:

1. Taxation compliance laws
2. Auditing standards and practices
3. Data analysis techniques associated with financial decision-making

The bottom line

A proper understanding of all branches of accounting is essential for businesses, government institutions, and nonprofits. Each accounting type is crucial, whether it’s financial reporting, cost analysis, or fraud detection.

If you are thinking about taking up an accounting job, check out the online BBA in Finance & Accounting on our platform. This course will give you a mix of theory and hands-on experience, both of which will help you stand out in that field.

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