Scope of Accounting

Management Accounting and Cost Accounting

Management or cost accounting is a management information system which analysis data to provide information as a basis for managerial action. The concern of a management accountant is to present accounting information in the form most helpful to management.

Financial Accounting

Financial accounting is mainly a method of reporting the results and financial position of a business. It is not primarily concerned with providing information towards the more efficient conduct of a business. This is particularly clear in the context of the published accounts of limited companies. Accounting standards and public law prescribe that a company should produce accounts to be presented to the shareholders.

Financial Management

The financial manager is responsible for raising finance and controlling financial resources. Including the following decisions:

(a) Should the firm borrow from a bank or raise funds by issuing shares?
(b) How much should be paid as a dividend?
(c) Should the firm spend money on new machinery?
(d) How much credit should be given to customers?
(e) How much discount should be given to customers who pay early?

Auditing

The annual accounts of a company must generally be audited by a person independent of a company. In practice, this often means that the members of the company appoint a firm of registered auditors to investigate the financial statements and report as to whether or not they show a true and fair view of the companies results for the year and its financial position at the end of the year.

Qualities of Good Accounting Information

Below are some features that accounting information should have if it is to be useful:

Relevance
Comprehensibility
Reliability
Completeness
Objectivity
Timeliness
Comparability