Accounting has the following major branches or types:
Financial accounting (also known as general accounting) is considered the original form of accounting. It provides a record of business transactions in financial terms and also the periodical preparation of financial statements from these records.
This type of accounting provides information to owners, management, government, creditors, bank and other financial institutions. The main purpose of financial accounting is to ascertain profit and loss made by the business during a particular period and show the financial position of the business entity as on a particular date.
In other words:
Financial accounting helps in determining the true financial results of a business. It provides helpful information to various users of the business who even don’t play an active part in the business.
Cost accounting emphasizes the determination of cost of production and distribution. It helps management in the control of cost. An efficient costing system is an important factor for industrial control.
Cost accounting is used to calculate the cost of a unit purchased. It also helps in measuring & controlling costs to increase profits. The data of cost accounting is generated through managerial accounting.
Management accounting (also termed as managerial accounting) is based upon the concept of accounting as a tool by which managerial effectiveness is enhanced. It provides necessary information to the management for discharging its functions. It seeks to make managerial control more effective by encouraging efficient planning. It provides built-in checks and balances and continuous review to prevent errors and frauds. It helps management to correct mistakes and improve methods.
Management accounting is basically related to providing useful information for decision making for management in dealing with various issues.