Accounting can be broadly classified into three categories:
1. Financial Accounting
2. Management Accounting
3. Cost accounting
1. Financial Accounting: It is the form of accounting. It is mainly confined to the preparation of financial statements for the use of outsiders like creditors, debenture-holders, Bank and Financial Institutions.
The main purpose of financial accounting is to ascertain profit or loss during specified period, to show financial condition of the business on a particular date and to have the firm's property.
2. Management Accounting: It is accounting for the management i.e.,accounting which provides necessary information to the management for discharging its functions. It covers all arrangements and combinations or adjustments of the orthodox information to provide the chief executive with the information from which he can control the business, e.g., information about funds, costs, profits etc.
3. Cost Accounting: Cost accounting is the process of accounting for costs. It is a systematic procedure for determining the unit cost of output produced or services rendered. The primary functions of cost accounting are to ascertain the cost of a product and to help the management in the control of the cost.
It is the provision of such analysis and classification of expenditure as it will enable the total cost of any particular unit of production or service to be ascertained with reasonable degree of accuracy and at the same time to disclose exactly how such total cost is constituted(i.e. the value of material used, the amount of labour and other expenses incurred) so as to control and reduce its cost.
