Scribd
Upload
2 views

AFM_-_Module_1 (unit - 1)

The document provides an overview of accounting, detailing its importance in tracking financial transactions and ensuring legal compliance. It distinguishes between financial, cost, and management accounting, highlighting their unique purposes and methodologies. Additionally, it outlines key accounting concepts and principles that guide the preparation of financial statements for effective business decision-making.

Uploaded by

devanshlakdawala2003
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
2 views

AFM_-_Module_1 (unit - 1)

The document provides an overview of accounting, detailing its importance in tracking financial transactions and ensuring legal compliance. It distinguishes between financial, cost, and management accounting, highlighting their unique purposes and methodologies. Additionally, it outlines key accounting concepts and principles that guide the preparation of financial statements for effective business decision-making.

Uploaded by

devanshlakdawala2003
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 14

MODULE 1

UNIT – 1 BASICS OF ACCOUNTING

Introduction to
Accounting 129- Panwala Krupali
84-Patel Khushi
What is Accounting?
The process of keeping track of all financial transactions within a business,
such as money coming in and money going out.
It is not only important for business in terms of record keeping and general
business management, but also for legal reasons and tax purpose.
Accounting is the process of recording, classifying and summarizing financial
transactions.
It provides a clear picture of the financial health of your organization and its
performance, which can serve as a catalyst for resource management and
strategic growth.
Accounting information exposes your company’s financial performance; it
tells whether you’re making profit or just running into losses at the end of
the day.
Concepts of Accounting
Accounting concepts are the fundamental ideas, assumptions and
statements of accounting theory that provide a framework for
financial accounting.
The principles are designed to ensure that financial statements will be
prepared in a consistent manner. When this happens it will be easier
to compare between businesses performance as well as their position
over time. This could help a lot when it comes to making important
business decision.
There are ten main accounting concepts or principles of accounting;
The going concern concept, Accrual basis, Revenue recognition,
Matching principles, Full disclosure, Conservatism principle, Materiality
principle, Income measurement & Cost benefit analysis.
What is Financial Accounting?
Financial accounting is a specific branch of accounting involving
a process of recording, summarizing, and reporting the myriad
of transactions resulting from business operations over a period
of time.
Financial accounting is the framework that dictates the rules,
processes, and standards for financial recordkeeping.
 Types of Financial Accounting:- Example; A public company’s income
statement is an example of financial
1. Cash accounting accounting.
2. Accrual accounting
What is Cost Accounting?
Cost accounting is a system that tracks and reports the costs of a company's
products and services, and helps managers make decisions about pricing,
budgeting, and profitability. Cost accounting is the reporting and analysis of a
company's cost structure.
Cost accounting is distinct and separate from general financial accounting, which
is designed for outside audiences and heavily regulated.
 Types of Cost Accounting:-
Example; a company that
1. Standard cost accounting manufactures gadgets might list the
2. Activity-based cost accounting cost of the materials used to make
each gadget, the labor required to
3. Marginal cost accounting assemble it, and the overhead costs
associated with running the factory
What is Management
Accounting?
Management accounting relates to the provision of appropriate
information for decision-making, planning, cost control and performance
evaluation.
Management accounting is the process of preparing reports about
business operations that help managers make short-term and long-term
decisions. It helps a business pursue its goals by identifying, measuring,
Example; A retail chain is planning its
analyzing, interpreting and communicating information to managers.
annual budget. Management accounting
Types of Management Accounting:- compiles historical sales data, cost
projections, and market trends to create
1. Product Costing and Valuation a budget that outlines expected
revenues and expenses. This budget
2. Cash Flow Analysis serves as a roadmap for allocating
3. Inventory Turnover Analysis resources and setting performance
targets throughout the year.
4. Constraint Analysis
Difference between Financial
accounting & Cost accounting
FINANCIAL ACCOUNTING COST ACCOUNTING

It is followed in all types of It is followed only in manufacturing


concepts. and service rendering concerns.

It records all types of It records only transactions relating


to manufacture and sale of goods
transactions of a concern. and services.
It is historical in character. It It is forward looking in character. It
records only past transactions. records estimates for the future.
It records expenditure in It records expenditure in an objective
subjective manner i.e.; manner i.e.; according to the
purpose for which they are incurred.
according to their nature.
The purpose of FA is to ascertain The purpose of CA is to provide
profit or loss and financial cost information to management
position of the business. for planning, control and
decision making.
FA is of little use in cost control
CA uses several techniques to
FA discloses profit or loss of the control the cost of production.
business as a whole
CA discloses profit or loss of
each product, process or
department.
Difference between Cost
Accounting & Management
Accounting
COST ACCOUNTING MANAGEMENT ACCOUNTING

It capture an enterprise costs of It refers to outlining of financial &


manufacturing by evaluating the non- financial data for the utilization
inputs costs of every step of of management of the enterprise.
manufacturing as well as fixed It includes both
costs. quantitative(financial) and
It includes quantitative data. qualitative(non financial) data.
Records both past and present Focuses more on scrutinizing for
data future projects.

It can be installed without a It cannot be installed without cost


management accounting. accounting.
Difference between Financial Accounting
and Management Accounting
FINANCIAL ACCOUNTING MANAGEMENT ACCOUNTING

It is used for external parties It is used for Internal parties


Reports on past performance of Informs internal decisions, provides
the business to external parties. feedback on the operating
performance of the business.
Regulated by regulators to make
sure it includes certain data. Tailor made to what information
managers require.
Reports on the entire
organization. Can be focused on specified areas
of business.
It is exact and must adhere to
GAAP It is based on estimates.
Difference between Financial accounting,
Cost accounting & Management accounting
Example of Financial accounting, Cost
accounting & Management Accounting
A scenario where a company calculates its overall profit for
external reporting (financial accounting), then breaks down
costs per product line to analyze profitability (management
accounting), and finally uses detailed cost breakdowns to
identify areas of cost reduction within the production process
(cost accounting).

You might also like