ACCOUNTING FIELDS
Like other subjects, Accounting has also its specialized fields. These different fields, as described below, provide different types of accounting information. Also you may have the choice to select any of the specialized field for your career and accordingly to go for the related courses to study.
Financial Accounting
This applies to the overall accounting for the business enterprise. It covers recording of business transactions and preparation of periodic statements from these records. Various general purpose and special purpose reports and statements also prepared from these accounting records to provide information to management, owners, creditors, government agencies and general public.
Cost Accounting
This relates to determination and the control of costs, particularly the costs of manufacturing processes and manufactured products. The cost accountant prepares and interprets cost data, both actual and prospective, for use of management in controlling manufacturing operations and also in planning for the future.
Management Accounting
This involves the development and interpretation of accounting information intended specifically to assist management in running the business, dealing with day-to-day problems and planning for the future. It provides analysis of alternative courses of action and guides in selecting the best one. It also provides guidelines for evaluating performance of departments and individuals. It basically, therefore, provides assistance to the management in making economic decisions.
Auditing
This field of accounting activity reviews general accounting independently. It provides guidelines to examine accounting records and statements and to express opinion regarding their fairness and accuracy. Its activities also determine whether various operating divisions and departments are observing the policies and procedures prescribed by management.
Tax Accounting
This field relates to the preparation of tax returns and tax related accounting statements. It helps in providing guidelines about tax consequences of any business transaction. The tax laws of the country are also relevant in it.
Budgetary Accounting
This field relates to presentation of plans of financial operations for a period. It provides a combination of planning, coordination and control of future operations. It lays down guidelines for analysis of comparison of actual operations with the budgeted operations.
Government Accounting
This specialized field deals with accounting information related to business aspect of public administration. It provides guidelines to control the expenditure of public funds, according to laws and prescribed procedures.
Accounting Instructions (Teaching)
This field relates to teaching and covers different subjects of accounting. This field helps in creating a work force in different fields of accounting who engage themselves at various levels and help in running the economic activity of the country.
Wednesday, March 3, 2010
USERS OF ACCOUNTING INFORMATION
Users of Accounting Information
The purpose of Accounting is to provide information to the users of Financial Statements. A classification of users into various categories and why they need it may be summarized as follows.
MANAGEMENT
Management is the first and most important group of users who receive and use the accounting information to run the business of the Company in most efficient way. They may need the support of Accounting information for an analysis of revenues and expenses, or for budgeting and cash flows, or for a decision on make-or-buy, or for any decision making for future planning.
SHAREHOLDERS AND POTENTIAL SHAREHOLDERS
This group makes the most use of financial information as they have to decide whether to continue their investment in the Company or to make investment in the Company. They evaluate the current performance of their investment from the available information in financial statements.
EMPLOYEES
This group uses accounting information to assess the potential performance of the Company. They form a view about future prospects and promotions in the Company and employee benefits that are going to be offered due to favorable results. This brings confidence and enthusiasm among employees.
LENDERS
This group includes those who have financed the Company over a long period (Long term loans from Banks, Leasing Companies and other Financial Institutions), and those who have provided short term finances like banks, and also those who have supplied raw materials, etc. on credit (Trade Creditors). They are primarily interested in the security of their finances and use the accounting information to work out whether the Company will be able to repay their credits on due dates and also the markup thereon. So they normally use the information to work out the Liquidity position of the Company.
GOVERNMENT AGENCIES
Various government agencies also use the Accounting Statements for their statistical purposes. The tax authorities also use it for annual assessment of income tax etc.
BUSINESS CONTACT GROUP
This group includes the Customers of the Company and also the competitors of the Company as they want to assess the viability and future prospects of the Company and also for comparison of data.
THE PUBLIC
Other groups from the general public may also use the Accounting information for different purposes depending upon their specific interests.
The purpose of Accounting is to provide information to the users of Financial Statements. A classification of users into various categories and why they need it may be summarized as follows.
MANAGEMENT
Management is the first and most important group of users who receive and use the accounting information to run the business of the Company in most efficient way. They may need the support of Accounting information for an analysis of revenues and expenses, or for budgeting and cash flows, or for a decision on make-or-buy, or for any decision making for future planning.
SHAREHOLDERS AND POTENTIAL SHAREHOLDERS
This group makes the most use of financial information as they have to decide whether to continue their investment in the Company or to make investment in the Company. They evaluate the current performance of their investment from the available information in financial statements.
EMPLOYEES
This group uses accounting information to assess the potential performance of the Company. They form a view about future prospects and promotions in the Company and employee benefits that are going to be offered due to favorable results. This brings confidence and enthusiasm among employees.
LENDERS
This group includes those who have financed the Company over a long period (Long term loans from Banks, Leasing Companies and other Financial Institutions), and those who have provided short term finances like banks, and also those who have supplied raw materials, etc. on credit (Trade Creditors). They are primarily interested in the security of their finances and use the accounting information to work out whether the Company will be able to repay their credits on due dates and also the markup thereon. So they normally use the information to work out the Liquidity position of the Company.
GOVERNMENT AGENCIES
Various government agencies also use the Accounting Statements for their statistical purposes. The tax authorities also use it for annual assessment of income tax etc.
BUSINESS CONTACT GROUP
This group includes the Customers of the Company and also the competitors of the Company as they want to assess the viability and future prospects of the Company and also for comparison of data.
THE PUBLIC
Other groups from the general public may also use the Accounting information for different purposes depending upon their specific interests.
QUALITIES OF ACCOUNTING INFORMATION
Qualities of Accounting Information
The following are the desirable qualities of Accounting Information to make it useful for its users. Accordingly these should be kept in mind while preparing Financial Statements.
RELEVANCE
It is primary Qualitative Objective.
It must be relevant for the users to evaluate the financial performance of the business, so that they may draw correct conclusions and make correct decisions.
If it is not relevant, it is useless.
To improve the relevance means to increase the usefulness of the accounting information.
UNDERSTANDABILITY
Financial information will be useful if it is expressed in terminology and in such a form that is understandable to the user.
RELIABILITY / VERIFIABILITY
Financial information should be of a standard that can be relied upon by external users, so that it is free from errors and can be depended upon by users in their decision making.
COMPLETENESS
It is also referred to as “Full Disclosure”.
Accounting Statements should show all aspects of the business.
All the financial accounting data, meeting the above qualitative objectives, should be reported.
LACK OF BIAS / NEUTRALITY
Financial Statements should not be biased in favor of one group of users to the detriment of another.
TIMELINESS
Accounting Statements should be published as soon as possible, after the close of the fiscal year. Other statements, as per law, even during the year should also be provided in the prescribed time.
Information furnished after a decision has been made is of no value.
COMPARABILITY
Accounting information should be comparable with that of other similar enterprises and from one period to the next.
The following are the desirable qualities of Accounting Information to make it useful for its users. Accordingly these should be kept in mind while preparing Financial Statements.
RELEVANCE
It is primary Qualitative Objective.
It must be relevant for the users to evaluate the financial performance of the business, so that they may draw correct conclusions and make correct decisions.
If it is not relevant, it is useless.
To improve the relevance means to increase the usefulness of the accounting information.
UNDERSTANDABILITY
Financial information will be useful if it is expressed in terminology and in such a form that is understandable to the user.
RELIABILITY / VERIFIABILITY
Financial information should be of a standard that can be relied upon by external users, so that it is free from errors and can be depended upon by users in their decision making.
COMPLETENESS
It is also referred to as “Full Disclosure”.
Accounting Statements should show all aspects of the business.
All the financial accounting data, meeting the above qualitative objectives, should be reported.
LACK OF BIAS / NEUTRALITY
Financial Statements should not be biased in favor of one group of users to the detriment of another.
TIMELINESS
Accounting Statements should be published as soon as possible, after the close of the fiscal year. Other statements, as per law, even during the year should also be provided in the prescribed time.
Information furnished after a decision has been made is of no value.
COMPARABILITY
Accounting information should be comparable with that of other similar enterprises and from one period to the next.
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