Before we go to differentiate Financial & Cost Accounting we must have knowledge what these both terms surely are. As we define both terms these would automatically be differentiated.
Financial Accounting:
Financial Power Of Attorney
Financial Accounting is a systematical way to put in order the financial statements of an society is order to get the true and fair view profit or loss. These financial statements are organized for decision making, stockholders, Banker, Supplier, Shareholders, Government Agencies, and other stakeholders. The basic requirement to put in order financial statement is to explore and cut the dead expenses by measuring the expenses and revenue status and to reporting the consequent to curious users. These statements are organized for outsiders who do not take part in day to day organizational activities.
Simply we can say, "Financial accounting is the process which includes recording, interpreting & summarizing date taken from financial records of an society and bring it out in an annual report for the benefit of citizen outside the organization".
In depth financial accounting contains some principles, Concepts & Equation.
Financial accountants manufacture financial statements based on Accounting theory which are generally standard by a exact country. Financial statements must be prepared agreeing to the (I Frs) International Financial Reporting Standards.
Accounting Equation: (Assets = Liabilities + Owner'S Equity).
Accounting Cycle:
1. Voucher.
2. General Journal.
3. General Ledger.
4. Cash Book.
5. Trail Balance.
6. Trading profit & Loss Account.
7. Balance Sheet. Cash Flow Statement.
First of all the transaction occurs and noted in the form called Voucher. All transactions are ready in vouchers. Then one exact form is created called normal Journal. All transaction recorded in one form. The next step is Called Posting in which all detach heads/accounting recorded separately in dissimilar form/accounts called normal Ledger. Cash Book is maintained to report the payments and recipes or organization. By the help of normal Ledger the Trail equilibrium prepared which provides the items of Trading, profit & Loss list and equilibrium Sheet which shows the financial position and the condition of the Organization. And lastly Cash Flow Statement is prepared to drive the accrual inflow & outflow of cash.
Cost Accounting:
Cost accounting ascertains funds and actual cost of production, operations, departments, process and the prognosis of variance. Cost accounting is used to preserve decision-making to cut cost of society and enhance its profitability. Cost accounting does not need standards as (Gaap) generally standard Accounting Principles, as its original use is for internal management, rather than outside people. Some of managerial accounting approaches are mentioned as under;
• Managerial Costing.
• Activity based Costing.
• Standard Cost Accounting.
• Resource Consumption Accounting.
Three Classical Cost Elements:
• Raw Material.
• Labor.
• Factory Over Head/Indirect Expenses.
Cost Accounting is being used to help the managers to understand & cut the running cost of an Organization. Most of Cost varied with the rate of production which is called "Variable Cost" like money spent on labor, power to run a factory, direct material etc. Unlikely changeable cost, some costs remain the same even while busy duration or while null production. These costs are call "Fixed Cost" like Depreciation on Assets, Rent of building etc.
In cost accounting some statements are prepare. Majors are revenue Statement, Cost of Goods Sold Statement, and Cost of production Report.
Income Statement:
Income statement is prepared to drive the net income/profit of the organization. In the process all direct Expenses related to buy of Goods/material are less from Sale and the retained number is called Gross Profit. Then all indirect expenses related to sales, Admin & Financial Charges are deducted from (Gp) Gross Profit, retained number after deduction is called (Np) Net Profit/income.
(Cgs) Cost of Goods Sold Statement:
Cost of Goods sold statement is prepared to drive the total cost which is spent on the purchasing to sell the produced Goods. In the preparing process first of all the end Martial of last year is added in buy of Martial, which is called "Total Material ready for Use" and Material Used is deducted from it. The remaining number is called "Cost of Material Consumed". Then the cost of Labor and (Foh) facility Overhead added in cost of material consumed. The total of this is called "Total facility Cost" after that chance stock of work in process is added and end stock of work in process is deducted from Total facility Cost. The number which drives after this is called "Cost of Goods Manufactured". Lastly the chance Stock of complete Goods is added and end Stock of complete Goods is deducted from Cost of Goods manufacture and the Answering number is Called "(Cgs) Cost of Goods Sold"
(Direct Material + Direct Labor= Prime Cost) (Labor + Foh= Conversion Cost)
Financial Accounting Versus Cost AccountingAchieving Transparency And Accountability In Federal Spending (Part 1 of 2) Video Clips. Duration : 74.67 Mins.Achieving Transparency And Accountability In Federal Spending (Part 1 of 2) - House Oversight Committee - 2011-06-14 - House Committee on Oversight and Government Reform. Witnesses: Panel I: The Honorable Earl Devaney, Chairman, Recovery Accountability and Transparency Board. Panel II: The Honorable Kim Wallin, Controller, State of Nevada; Ms. Ellen Miller, Co-Founder and Executive Director, Sunlight Foundation; Mr. Patrick Quinlan, President, Rivet Software; Mr. Craig Jennings, Director Federal Fiscal Policy, OMB Watch. Video provided by US House of Representatives.
Keywords: oversight.house.gov, public.resource.org
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