There are several types of accounting & account niche that are meant to be for different category of organization & for different industry type, but in root of that there are only two type : {1} Financial Accounting {2} Cost Accounting
Financial Accounting
The practice of recording, summarizing, and reporting the financial transactions resulting from ongoing business operations is known as financial accounting. These activities are described in the accounts that are prepared, such as the balance sheet, income statement, and cash flow statement, which show the company’s financial performance over a specific time period.
Assets, liabilities, income, costs, and equity are the five fundamental elements that underpin all financial transactions. Every financial transaction also contains two equally important components. For instance, under the double-entry approach, both the cash and the bank would be impacted if money was withdrawn from a bank and recorded in the company’s books. These two parts are referred to as debit and credit in the double-entry system. Debit is the result of either a rise in assets and costs or a fall in liabilities and profits. Either an increase in obligations and revenue or a decrease in assets and costs is considered credit.
Net profit is determined at the bottom of the income statement as a result of financial accounting. The accounting for assets, liabilities, and equity are detailed in the balance sheet. The control of the company’s prospective economic benefits is disclosed on the balance sheet using financial statements.
Cost Accounting
Cost Accounting is the process of preparing reports to measure cost of a product or services to minute extent.
The origins of cost accounting are attributed to the industrial revolution, when companies were compelled to monitor their fixed and variable costs in order to automate their manufacturing operations due to the new global supply and demand economies.
The internal management team of a corporation uses cost accounting to determine all variable and fixed expenses related to the production process. To help with measuring financial performance and making future business decisions, it will first measure and record each of these charges individually. Cost accounting involves several different forms of costs, which are described here.
Cost accounting is useful because it can show how much money a business makes, where it spends it, and where it loses it. Internal cost controls and efficiency are intended to be reported on, examined, and improved through the use of cost accounting. Cost-accounting data is essential for internal controls even though businesses cannot use it for tax or financial reporting purposes.
The many cost types include direct, indirect, fixed, and variable costs. No matter how many units of manufacturing are added or subtracted, fixed costs remain constant. Rent is one example of a fixed expense. Even whether production rises or falls, the company is still required to pay the same amount of rent each month. According to the growth or decline in production units, variable costs change. For instance, the price of raw materials changes frequently. If output rises or falls, the total cost of raw materials fluctuates.
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