Page 6 - DCOM302_MANAGEMENT_ACCOUNTING

Unit 1: Introduction to Accounting
Manpreet Kaur, Lovely Professional University

Unit 1: Introduction to Accounting Notes

CONTENTS

Objectives
Introduction
1.1 Management Accounting as an Area of Accounting
1.2 Branches of Accounting and its Interrelationships
1.3 Role of Management Accountants

1.4 Summary
1.5 Keywords
1.6 Review Questions
1.7 Further Readings

Objectives

After studying this unit, you will be able to:
Describe management accounting as an area of accounting
Identify the branches of accounting and it’s inter relationships
Discuss the role of management accountants

Introduction

Accounting is a business language that elucidates the various kinds of transactions during the

given period of time. Accounting is defined as either recording or recounting the information
of the business enterprise, transpired during the specific period in the summarized form. The

American Institute of Certified Public Accountants Association defines the term accounting as

follows: “Accounting is the process of recording, classifying, summarizing in a signifi cant
manner, of transactions which are financial in nature and finally interpreting the results.”

Management accounting is the accounting system for making decisions of the business enterprise.
Management accounting furnishes the necessary information to assist the business enterprise to
make rational decisions through the development of policies and procedures in order to meet the
day to day commitments of the enterprise.

Did u know? Is accounting an equivalent function to book-keeping?
No, accounting is broader in scope than the book-keeping; the former cannot be equated
to the later.

1.1 Management Accounting as an Area of Accounting

Management accounting as a new branch of accounting is of recent origin. Financial accounting
recorded business transactions on double-entry basis and helped ascertainment of profit or loss

for the given period and valuation of stock of assets and liabilities on a given date. Financial
accounting enabled the concern with the liabilities and safeguard the assets entrusted and therefore,

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