FIN 107 Assignment Question and Answers

List the various branches of accounting and outline how financial differ from management ?
State how accounting differ from book-keeping ?
Identify five users of account information and State how useful it’s for them?

ASSIGNMENT SOLUTIONS

Accounting has several branches that cater to different aspects of financial management. These include:

Financial Accounting: This branch focuses on the preparation of financial statements such as the balance sheet, income statement, and cash flow statement to provide a clear picture of the financial position and performance of an organization.
Management Accounting: This deals with internal financial reporting to assist managers in decision-making. It includes budgeting, forecasting, and performance analysis.
Cost Accounting: This focuses on the calculation and control of costs. It helps businesses determine the cost of production and find ways to minimize costs.
Auditing: Auditing involves reviewing and verifying the accuracy of financial records to ensure compliance with laws and regulations.
Tax Accounting: This deals with tax-related issues, including the preparation of tax returns and advice on tax planning.
Forensic Accounting: This branch investigates financial fraud, misconduct, or disputes and is often used in legal cases.
Public Accounting: Public accountants provide services such as auditing, tax planning, and consulting for individuals and organizations.

Purpose: Financial accounting focuses on creating financial statements for external stakeholders (e.g., investors, creditors, regulators), whereas management accounting is geared towards internal use, providing information that helps managers make informed decisions about the organization’s operations.
Reporting Frequency: Financial accounting is typically done at the end of an accounting period (quarterly, yearly), while management accounting reports can be done more frequently (e.g., monthly or weekly).
Standards: Financial accounting follows strict guidelines and standards (like IFRS or GAAP), while management accounting is more flexible and tailored to the company’s internal needs.
Audience: Financial accounting targets external stakeholders, such as investors and government agencies, while management accounting targets internal stakeholders like managers and department heads.

Scope: Bookkeeping is the process of recording daily financial transactions, ensuring that the basic records are accurate. It is a subset of accounting. Accounting, on the other hand, involves analyzing, summarizing, interpreting, and reporting financial data to provide a comprehensive view of the organization’s financial health.
Function: Bookkeeping is more about the recording and organizing of financial data, while accounting involves higher-level tasks such as preparing financial statements, audits, and providing insights for decision-making.
Complexity: Accounting is more complex as it involves analyzing financial data, making adjustments, and preparing reports, whereas bookkeeping is more about maintaining day-to-day records without much interpretation.

Investors: Investors use accounting information to assess the profitability and financial stability of a business, helping them decide whether to invest or not.
Creditors (Banks): Creditors use accounting information to determine the creditworthiness of a business. They assess whether the business can repay loans or debts.
Management: Management relies on accounting information to make strategic decisions, such as pricing strategies, cost-cutting measures, and expansion plans.
Government and Tax Authorities: Governments use accounting information to ensure compliance with tax laws and regulations. It helps in determining tax obligations and ensuring proper reporting.
Employees: Employees may use accounting information to understand the financial health of their company, which can influence decisions related to job security, salary negotiations, or potential bonuses.

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