The types of accounting information may be classified into four categories: (1) operating information, (2) financial accounting information (3) management accounting information and (4) cost accounting information.
By operating information, we mean the information which is required to
conduct the day-to-day activities. Examples of operating information are:
amount of wages paid and payable to employees, information about the stock of
finished goods available for sale and each one’s cost and selling price,
information about amounts owed to and owing by the business enterprise,
information about stock of raw materials, spare parts and accessories and so
on. By far, the largest quantity of accounting information provides the raw data
(input) for financial accounting, management accounting and cost accounting.
Financial accounting information is intended both for owners and
managers and also for the use of individuals and agencies external to the
business. This accounting is concerned with the recording of transactions for a
business enterprise and the periodic preparation of various reports from such
records. The records may be for general purpose or for a special purpose. A
detailed account of the function of financial accounting has been given earlier
in this lesson.
Management accounting employs both historical and estimated data in
assisting management in daily operations and in planning for future operations.
It deals with specific problems that confront enterprise managers at various
organizational levels. The management accountant is frequently concerned with
identifying alternative courses of action and then helping to select the best
one. For e.g. The accountant may help the finance manager in preparing plans
for future financing or may help the sales manager in determining the selling
price to be fixed on a new product by providing suitable data. Generally
management accounting information is used in three important management functions:
(2) co-ordination and (3) planning. Marginal costing is an important
technique of management accounting which provides multi dimensional information
that facilitates decision making.
industrial revolution in england posed a challenge to the development of
accounting as a tool of industrial management. This necessitated the
development of costing techniques as guides to management action. Cost
accounting emphasizes the determination and the control of costs. It is
concerned primarily with the cost of manufacturing processes. In addition, one
of the principal functions of cost accounting is to assemble and interpret cost
data, both actual and prospective, for the use of management in controlling
current operations and in planning for the future.
the activities described above are related to accounting and in all of them the
focus is on providing accounting information to enable decisions to be made.
More about cost accounting can be gained in unit v.