Accounting – Meaning, Branches, Advantages & Disadvantages

What Is Account?

The statement which records various transactions relating to a particular item within the “T” Format is called account.It has two side. Left hand side is known as the debit side and right side is known as credit side.

What Is Accounting?

Accounting is the process of identifying, recording and classified the financial transactions and preparing financial statements for reporting performance and position to interested parties or organisations.

Advantages of Accounting

To draw a better idea on accounting some of the important advantages of accounting are discussed one by one:

Replacement of memory

Accounting is very much helpful in maintaining a record of every transaction in different books of account. So as the human memory has limited capacity accounting helps to replace it.

Helpful in Tax assessment

Every business is required to pay various taxes like income tax, Excise duty, VAT etc to the Govt. The fixation of tax liability in the basics of account books. So it is very helpful in tax assessment.

Evidence in court or legal work

The dispute and conflict arises in every organisation from time to time.Therefore,a properly maintenance of accounts are treated in good evidence in the court for the settlement of disputes.

Helps in Compartive study

Accounting information helps to compare the present performance of the enterprise with the past to help the interested parties to know the performance of the enterprise of different periods.

Helps in detecting errors and frauds

The maintenance of proper accounting records is very much helpful in the early detection of irregularities of errors and frauds.So it is not easy for a dishonest employee to commit fraud irrespective of cash, etc.

Helps in raising funds

Adequate accounting records enable the creditors to judge credit worthiness of an organisation. So it is very much helpful to raise funds in the forms of loans.

Control over assets

Accounting also provides complete information on business assets. Therefore,  it enables the management and owner to make proper utilization.

Helps in planning and control

Adequate accounting information helps to management in planning operation and controlling all business activities.It also helps to plan for the future targets.

Business Valuation

Accounting helps the calculation of value of business.It is very essential at the time of sale and purchase of business to ascertain sale and purchase price.

Keep Systematic records

Accounting helps to maintain systematic record of all financial it enables the management to access all the information easily and take appropriate decisions.

Disadvantages of Accounting

No scope for non-monetary transaction

Accounting only records those transactions which can be expressed in terms of money.It does not record non monetary transactions such as honesty ,efficiency, dedication etc.Which have direct impact on profitability of concern.

Historical in Nature

Accounting records historical cost which does not reflect the current values. So some of the current value of assets are much more than the historical cost.

Personal Bias

Accounts statements are influenced by the personal judgement of the accountant.He may select any method comfortable for him.So it will definitely affect the preparation of the accounting statement.

Permits alternative treatment

Accounting allows the use of different method for same transaction.Application of a different method may give a different result,which affects the ascertainment of the true financial position and performance.#

No realistic information

Sometimes accounting information may not be realistic.It is based on various concepts and conversions. The statement prepared on the basis of principle may not reflect the true position of the business.

Manipulation of accounting data

The accounting data may be manipulated by concerned authorities in the business, it may show over valuation of assets and under valuation of liabilities. In order to reflect higher profit for encouraging investors.

Does not Provide detailed analysis

The information supplied by accounting is the Aggregate of the financial transaction.It enables to study the overall result of the business but does not provide information product wise.


  1. On the basis of uses and it’s utility accounting is mainly classified into three types for the sake of clarification the Branches of Accounting are discussed below:

Financial Accounting

The accounting which helps in the preparation of financial accounts in order to know the financial performance and financial position of an organisation is called Financial Accounting.

Management Accounting

The accounting which is concerned with presentation of information in such a way so that the management body can create policy and take decisions on the day to day activities is called management accounting.

Cost Accounting

The process of recording, classifying, summarising, interpreting and reporting to cost information is called Cost Accounting. Cost accounting is the process of accounting for cost. It is the branch of accounting which enables us to exercise better cost control and reduce cost of production.

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