Question

Explain the concept of financial accounting in detail. how is it different from cost accounting?

IN DEATIL PLEASE NO SHORT ANSWER PLEASE

ATLEAST 500 WORDS FOR BOTH PART

Answer 1

Financial accounting is a specialized branch of accounting that keeps track of company's financial transactions . Using standardized guidelines , the transactions are recorded, summarized and presented in financial report or financial statement such as an income statement or balance sheet.

Companies issues financial statement on a routine schedule .The statements are considered external because they are given to the people outside of the company , with the primarily recipient s being owners / stakeholders , as well as certain lenders . If a corporation s stock is publicly traded ,however it's financial statement tends to be widely circulated and information will likely reach secondary recipients such as competitors , customers, employees labour organizations and investment analyst.

It is important to point out that the purpose of financial accounting is not to report the value of a company . Rather it's purpose is to provide enough information for others to assess the value of a company for themselves.

Because external financial statements are used by a variety of people in a variety of ways .Financial accounting has common rules known as accounting standards and generally accepted accounting principles (GAAP).

Both cost accounting and financial accounting help the management formulate and control the organization policies . Financial management gives an overall picture of profit or loss and costing provides detailed product wise analysis.

No doubt , the purpose of both is same but still there is lots of difference in financial accounting and cost accounting . For example ,if a company in dealing of 10 types of products , financial accounting provided information for all the products in totality under different categories of expenses heads such as cost of material , cost of labour, freight charges ,direct expenses and indirect expenses . in contrast cost accounting gives detail of each overhead product wise such as material ,labour, direct and indirect expenses are consumed in each unit . With the help of costing we get product wise cost , selling price and profitability.

Purpose of the financial statement is to show the correct financial position of the organisation .

While the cost accounting is to calculate cost of each unit of product on the basis of which we can take accurate decision .