Financial Accounting Versus Cost Accounting
Financial Accounting Versus Cost Accounting
Before we go to differentiate Financial & Price Accounting we must have understanding what these both terms really are. As we specify both terms these would automatically be differentiated.
Financial Accounting:
Financial Accounting is a systematical way to prepare the financial statements of a company is order to acquire the accurate and fair view to profit or loss. These financial statements are organized for decision making, stockholders, Banker, Supplier, Shareholders, Government Agencies, and other stakeholders. The basic need to prepare financial statement is to examine and reduce the dead expenses by measuring both the expenses and earnings status and to reporting the result to interested users. These statements are organized for outsiders who do not take part in day to day organizational activities.
Simply we can declare,"Financial accounting is the process including record, interpreting & summarizing date taken from financial records of an organization and deliver it out in an yearly report for the benefit of individuals outside the company".
Simply we can declare,"Financial accounting is the process including record, interpreting & summarizing date taken from financial records of an organization and deliver it out in an yearly report for the benefit of individuals outside the company".
In depth fiscal accounting includes a few fundamentals, Concepts & Equation.
Financial accountants arrange financial statements based on Accounting Principles that are generally accepted by a particular country. Financial statements should be prepared in accordance with this (I FRS) International Financial Reporting Standards.
Accounting Equation: (ASSETS = LIABILITIES + OWNER'S EQUITY).
Financial accountants arrange financial statements based on Accounting Principles that are generally accepted by a particular country. Financial statements should be prepared in accordance with this (I FRS) International Financial Reporting Standards.
Accounting Equation: (ASSETS = LIABILITIES + OWNER'S EQUITY).
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 of the transaction occurs and noticed in the form called Voucher. All transactions are available in vouchers. Then one special form is created called General Journal. All transaction listed in 1 form. The following step is Called Pairing where all separate heads/accounting recorded individually in different form/accounts known as General Ledger. Cash Book is maintained to record the recipes and payments or business. By the assistance of General Ledger the Course Movements prepared which offers the things of trading, gain & Loss account and Balance Sheet which shows the financial situation and the health of the Organization. And lastly Money Flow Statement is ready to drive the accrual inflow & outflow of money.
Cost Accounting:
Cost accounting ascertains budget and actual price of production, operations, departments, process and the analysis of variance. Cost accounting is utilized to encourage decision-making to reduce cost of business and improve its profitability. Cost accounting does not require criteria as (GAAP) Generally Accepted Accounting Principles, as its main use is for internal direction, rather than external men and women. A number of managerial accounting approaches are cited as below;
Cost Accounting:
Cost accounting ascertains budget and actual price of production, operations, departments, process and the analysis of variance. Cost accounting is utilized to encourage decision-making to reduce cost of business and improve its profitability. Cost accounting does not require criteria as (GAAP) Generally Accepted Accounting Principles, as its main use is for internal direction, rather than external men and women. A number of managerial accounting approaches are cited as below;
• Managerial Costing.• Activity-based Costing.• Standard Cost Accounting.• Resource Consumption Accounting.
Three Classical Cost Elements:
• Raw Material.• Labor.• Factory Over Head/Indirect Expenses.
Three Classical Cost Elements:
• Raw Material.• Labor.• Factory Over Head/Indirect Expenses.
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 & reduce 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 variable cost, some costs remain the same even while busy period or during 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 Income 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 purchase of Goods/material are less from Sale and the retained amount is called Gross Profit. Then all indirect expenses related to sales, Admin & Financial Charges are deducted from (GP) Gross Profit, retained amount 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 preparation process first of all the Closing Martial of last year is added in purchase of Martial, which is called "Total Material Available for Use" and Material Used is deducted from it. The remaining amount is called "Cost of Material Consumed". Then the cost of Labor and (FOH) Factory Overhead added in cost of material consumed. The total of this is called "Total Factory Cost" after that Opening stock of work in process is added and closing stock of work in process is deducted from Total Factory Cost. The amount which drives after this is called "Cost of Goods Manufactured". Lastly the Opening Stock of Finished Goods is added and Closing Stock of Finished Goods is deducted from Cost of Goods Manufacture and the Answering amount is Called "(CGS) Cost of Goods Sold"
(Direct Material + Direct Labor= Prime Cost) (Labor + FOH= Conversion Cost)
For More Help regarding accounting questions Please Visit: https://www.deskera.com/blog/what-is-the-accounting-cycle/
Three Classical Cost Elements:
• Raw Material.• Labor.• Factory Over Head/Indirect Expenses.
Cost Accounting is being used to help the managers to understand & reduce 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 variable cost, some costs remain the same even while busy period or during 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 Income 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 purchase of Goods/material are less from Sale and the retained amount is called Gross Profit. Then all indirect expenses related to sales, Admin & Financial Charges are deducted from (GP) Gross Profit, retained amount 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 preparation process first of all the Closing Martial of last year is added in purchase of Martial, which is called "Total Material Available for Use" and Material Used is deducted from it. The remaining amount is called "Cost of Material Consumed". Then the cost of Labor and (FOH) Factory Overhead added in cost of material consumed. The total of this is called "Total Factory Cost" after that Opening stock of work in process is added and closing stock of work in process is deducted from Total Factory Cost. The amount which drives after this is called "Cost of Goods Manufactured". Lastly the Opening Stock of Finished Goods is added and Closing Stock of Finished Goods is deducted from Cost of Goods Manufacture and the Answering amount is Called "(CGS) Cost of Goods Sold"
(Direct Material + Direct Labor= Prime Cost) (Labor + FOH= Conversion Cost)
For More Help regarding accounting questions Please Visit: https://www.deskera.com/blog/what-is-the-accounting-cycle/