There are three broad categories of accounting books: financial, costing, and management. Accounting should be differentiated from book-keeping; book-keeping is primarily concerned with accurate recording of financial transactions which involve money transfer. On the other hand, accounting is more comprehensive, which involves classification, stigmatization, presentation and analysis of accounting information.
Accounting revolves around recording, classification, and analysis of financial transactions. Accountancy refers to the art and practice of the science known as accounting. Diverse individuals, such as entrepreneurs, members of management, tax authorities, and creditors, have made unique demands on accounting, which has led to the creation of different branches. A plethora of accounting books is available on each aspect of accounting.
The primary goal of financial a/c involves the ascertaining of profit or loss in business operations in a particular period of time. When the period ends, the financial position can be stated, with the help of the balance sheet. Hence, financial a/c books are crucial to the functioning of business establishments.
Another branch of accounting is cost a/c, whose goal is to ascertain the cost price of manufactured goods or services delivered by a business establishment. Cost a/c also enables a business establishment to manage costs by highlighting potential wastes and losses. Cost a/c books give great insight and depth into this branch of book keeping.
One of the most important goals of management a/c is to provide accurate information to the management at the right time to allow it make crucial decisions and exercise control.
Of all the three branches, financial a/c is the most important. The goals related to financial a/c are achieved by maintaining a record of financial transactions systematically, based on a number of principles. The information that has been recorded should undergo classification, analysis, and presentation to ascertain the financial wellbeing and business results.
Book keeping has diverse uses and plays a crucial role in the wellbeing of an organization by providing answers to important questions related to accounts. Some of the questions tackled by accounting are listed below:
What is the business’s financial condition?
Does the business register profits or losses?
What is the performance of the diverse departments of the establishment?
Which products or services have registered profits?
Which service or product needs to be discontinued?
Which goods or services should see an increase in production?
Whether a particular component should be purchased or manufactured?
Whether production costs are excessive or reasonable?
How has the business profited from existing policies?
What will be the impact of new decisions on the profitability of the business?
Keeping past performance in mind, how should the future be planned to achieve desired profits?