Q1- Basic Accounting Processes and Systems (ICAN ATSWA Sept 2021 Insight)

Question 1

The branch of accounting that involves the accumulation of data to provide information for managerial action is   

A. Financial accounting  

B. Performance management  

C. Financial management  

D. Forensic accounting  

E. Cost accounting 

The correct answer is (E)

Hint: 

The question above tests major keywords which are "branch of accounting", "accumulation of data" and "managerial action". Here is what you need to know.

Question Review:

Different branches of accounting came into existence as a result of the various types of accounting information required by different parties including owners, shareholders, management, suppliers, creditors, tax authorities, government agencies, etc. 

There are three main accounting branches, which include financial accounting, cost accounting, and management accounting. Other accounting branches came up as a result of commercial development and emerging needs of business reporting the world over.

These branches of accounting include: financial accounting, managerial accounting, cost accounting, auditing, tax accounting, fiduciary accounting, project accounting, forensic  accounting, fund accounting, government accounting, political campaign accounting, international accounting, etc.

Let's see what we've got in the answer options.

Financial accounting involves a process of recording, summarizing, and reporting transactions resulting from business operations over a period of time.

Performance management is the process of ensuring that a set of activities and outputs meets an organization's goals in an effective and efficient manner.

Financial management is the process of planning, organizing, controlling and monitoring financial resources with a view to achieve organizational goals and objectives.

Forensic accounting is the investigation of fraud or financial manipulation by performing extremely detailed research and analysis of financial information.

Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future. Cost accounting information is also commonly used in financial accounting, but its primary function is for use by managers to facilitate their decision-making.

From the above definitions the closest answer is seen in Cost accounting.

So the correct answer is (E)

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