Question

Explain the difference between financial accounting and management accounting 2. What are subsidiary ledgers and reconciliation accounts? How are they related? 3. Explain the three transaction types in asset accounting. 4. What are depreciation areas? Why are different depreciation areas necessary? 5. What are charts of accounts and the general ledger? How are they related? 6. Briefly describe the key processes in financial accounting

Answer 1

Answer(1): Difference between financial accounting and management accounting:

S.no.	Financial Accounting	Managerial Accounting
1	It is more concerned with financial decisions of the company	It is more concerned with managerial decisions of the company.
2	It prepares financial statements; balance sheet, income statement, cash flows and ratio analysis	It prepares Budgets, cost sheet, policies and plans.
3	It represents monetary information only	It represents monetary and non monetary both the information.
4	Financial statements are audited and issue in the public domain	Audit is not mandatory and nothing is issued in public domain.
5	This is for external purpose, it reports income and profit.	This is for internal purpose, it analyzes the problem and solution.

Answer(2): Subsidiary Ledger- This is a small account or a sub account that provides information to general ledger account. Many subsidiary ledgers are made and with the help of these subsidiary ledgers, one general ledger is prepared. Subsidiary ledgers are made for specific purpose.

Examples of subsidiary ledgers: Are as following:

1. Fixed assets ledger
2. Account receivable ledger
3. Account payable ledger
4. Inventory ledger

Reconciliation accounts- Reconciliation is a process of correcting the amount by using two or more accounts together. This is done to check whether the account balances are correct or not.

How are they related?- Reconciliation is done with the help of subsidiary ledgers. Sub accounts are cross checked to check the final balances whether they are correct and matching or not.