In the accounting system, the records are kept in term of money for a specified period to provide certain information to various related persons on a given date. In small concerns only the financial accounts are kept and the purpose of maintaining the records is solved but in large organizations there are lot of information to be provided which is not possible by maintaining the financial accounts only. Therefore, the large business firms normally maintain three forms of accounting systems i.e. financial accounting, cost accounting and management accounting as per the details are given below:-
- Financial Accounting:- These records are kept to show the financial position of the firm. Profit and Loss Account and Balance Sheets are prepared with the help of financial accounting.
- Cost Accounting:- These records are kept to know the actual cost of product and services, These records are maintained with the help of cost accounting system. Cost accounting is a systematic procedure for classification, recording, and allocation of the cost of a product or service rendered. Cost accounting is very important from the point of view to determine the percentage of profit on products. The cost accounting system plays a very important role for determination of certain tax and duties.
- Management Accounting:- By using management accounting system, the records are kept in such a way so that these records can provide very important and serious information to the management at any point of time so that certain important decisions can be taken to minimize the loss and improving the quality of the product or service rendered. Management accounting system also helps the management to understand the performance of employees, the best utilization of funds etc.
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