Before we head to differentiate Financial & Cost Accounting we should have knowledge gadgetanda what these both terms actually are. As we define both terms these would automatically be differentiated.
Financial Accounting can be a systematical way to prepare the financial statements of the organization is order to obtain the true and fair view profit or loss. These fiscal reports are organized for decision making, stockholders, Banker, Supplier, Shareholders, Government Agencies, along with other stakeholders. The basic requirement to get ready financial statement is always to examine and reduce the dead expenses by measuring the expenses and income status and also to reporting the result to interested users. These statements are organized for outsiders that do not indulge in daily organizational activities.
Simply we can say, “Financial accounting is the method which include recording, interpreting & summarizing date obtained from financial records of your organization and bring it out in an annual report for that good thing about people outside of the organization”.
Comprehensive financial accounting contains some principles, Concepts & Equation.
Financial accountants organize fiscal reports based on Accounting Principles which are generally accepted with a specific country. Financial statements should be prepared based on the (I FRS) International Financial Reporting Standards.
Accounting Equation: (ASSETS = LIABILITIES + OWNER’S EQUITY).
6.Trading profit & Loss Account.
7.Balance Sheet. Cashflow Statement.
To start with the transaction occurs and noted inside the form called Voucher. All transactions can be found in vouchers. Then one specific form is made called General Journal. All transaction recorded in one form. The next phase is Called Posting by which all separate heads/accounting recorded separately in numerous form/accounts called General Ledger. Cash Book is maintained to record the payments and recipes or organization. Through the aid of General Ledger the Trail Balance prepared which gives those items of Trading, profit & Loss account and Balance Sheet which shows the budget as well as the health from the Organization. And finally Cashflow Statement is prepared to drive the accrual inflow & outflow of income.
Cost accounting ascertains budget and actual cost of production, operations, departments, process as well as the analysis of variance. Cost accounting is used to aid decision-making to reduce price of organization and improve its profitability. Cost accounting doesn’t require standards as (GAAP) Generally Accepted Accounting Principles, becasue it is primary use is for internal management, as opposed to outside people. Some of managerial accounting approaches are mentioned as under;
Activity based Costing.
Standard Cost Accounting.
Resource Consumption Accounting.