It doesn’t matter that you are from commerce or non commerce background. Accounting is for everyone. Everyday each and every human being do accounting knowingly or unknowingly.
What do you mean by word Accounting?
The word accounting means any type of accounting. Even if you look at the spelling of this word accounting,it envolves the spelling the word counting.
History and Evolution of Accountancy?
The evolution of accounting starts from mathematics. Long back from Egypt, In the year 1494 “Sir Luca D Pacilio” anylaysed that the way we do mathematics with + (plus) – (minus), in the same way in accounting there is something we receive and and something we give – something neutral.
+5 +5 = +10
-5 -5 = -10
+5 -5 = 0
After this Sir Luca D Pacilio given two words:-
Debere (Abbreviation - DR.)
Credere (Abbreviation - CR.)
and after research in the year 1506, he published the book on double entry system of accounting. That’s we can say that the propounder of accountancy is an “Italian Mathematician: Sir Luca D. Pacioli”.
What are the branches of Accounting?
There are five branches of accounting:-
- Cost accounting
- Management accounting
- Financial accounting
- Social responsibility accounting
- Human resource accounting
1. What is Cost accounting?
If any business wants to maximize their profit then he can either reduce the cost price or increase the sales or selling price. But selling price can not be increased in general.
Cost + Profit = Sales
CP + p = SP
- a. Price taker:- Price taker means when there is perfectly competitive market. You can not determine the selling price because of the multiple seller of the same goods or service.
- b. Price maker:- Price taker means when there is monopolistic market. You can determine the selling price because of the less or no seller of the same goods or service. Antiques, paintings, Land,
In the perfectly competitive market, selling price is beyond our control. In that case we have one option to reduce the cost without affecting the quality of the product or service.
Cost accounting is that branch of accounting which deals with:-
- Cost ascertainment (the process of finding something out for certain)
- Cost reduction
- Cost control (Periodically you will have to take some controlling measures. ex – sweet shop use to have contract in agreed rate with the wholesaler for materials for whole year. Sugar, dry fruits, etc. )
2. What is Management accounting?
Management accounting is that branch of accounting which deals with preparation of various managerial reports. i.e MIS (Management Information System), to enable the managements to take future decisions on the basis of past data.
Big organizations use to run with the help of three tier management.
- Top level/Executive level – To make policies/ TO make future plans
- Middle/Managerial level – Who can work done from others /TO supervise
- Bottom/Operational level – Work done or executed by this level