Rabu, 20 Juni 2012

Financial Accounting Versus Cost Accounting

Before we go to differentiate Financial & Cost Accounting we must have knowledge what these both terms really are. As we define both terms these would automatically be differentiated.

Financial Accounting:

Financial Accounting is a systematical way to prepare the financial statements of an organization is order to get the true and fair view profit or loss. These financial statements are organized for decision making, stockholders, Banker, Supplier, Shareholders, Government Agencies, and other stakeholders. The basic requirement to prepare financial statement is to examine and reduce the dead expenses by measuring the expenses and income status and to reporting the result to interested users. These statements are organized for outsiders who do not take part in day to day organizational activities.

Simply we can say, "Financial accounting is the process which includes recording, interpreting & summarizing date taken from financial records of an organization and bring it out in an annual report for the benefit of people outside the organization".

In depth financial accounting contains some principles, Concepts & Equation.

Financial accountants organize financial statements based on Accounting Principles which are generally accepted by a specific country. Financial statements must be prepared according to the (I FRS) International Financial Reporting Standards.


Accounting Cycle:

1. Voucher.
2. General Journal.
3. General Ledger.
4. Cash Book.
5. Trail Balance.
6. Trading profit & Loss Account.
7. Balance Sheet. Cash Flow Statement.

First of all the transaction occurs and noted in the form called Voucher. All transactions are available in vouchers. Then one specific form is created called General Journal. All transaction recorded in one form. The next step is Called Posting in which all separate heads/accounting recorded separately in different form/accounts called General Ledger. Cash Book is maintained to record the payments and recipes or organization. By the help of General Ledger the Trail Balance prepared which provides the items of Trading, profit & Loss account and Balance Sheet which shows the financial position and the health of the Organization. And lastly Cash Flow Statement is prepared to drive the accrual inflow & outflow of cash.

Cost Accounting:

Cost accounting ascertains budget and actual cost of production, operations, departments, process and the analysis of variance. Cost accounting is used to support decision-making to reduce cost of organization and improve its profitability. Cost accounting does not require standards as (GAAP) Generally Accepted Accounting Principles, as its primary use is for internal management, rather than outside people. Some of managerial accounting approaches are mentioned as under;

• Managerial Costing.
• Activity based Costing.
• Standard Cost Accounting.
• Resource Consumption Accounting.

Three Classical Cost Elements:

• Raw Material.
• Labor.
• Factory Over Head/Indirect Expenses.

Cost Accounting is being used to help the managers to understand & reduce the running cost of an Organization. Most of Cost varied with the rate of production which is called "Variable Cost" like money spent on labor, power to run a factory, direct material etc. Unlikely variable cost, some costs remain the same even while busy period or during null production. These costs are call "Fixed Cost" like Depreciation on Assets, Rent of building etc.

In cost accounting some statements are prepare. Majors are Income Statement, Cost of Goods Sold Statement, and Cost of Production Report.

Income Statement:

Income statement is prepared to drive the net income/profit of the organization. In the process all direct Expenses related to purchase of Goods/material are less from Sale and the retained amount is called Gross Profit. Then all indirect expenses related to sales, Admin & Financial Charges are deducted from (GP) Gross Profit, retained amount after deduction is called (NP) Net Profit/income.

(CGS) Cost of Goods Sold Statement:

Cost of Goods sold statement is prepared to drive the total cost which is spent on the purchasing to sell the produced Goods. In the preparation process first of all the Closing Martial of last year is added in purchase of Martial, which is called "Total Material Available for Use" and Material Used is deducted from it. The remaining amount is called "Cost of Material Consumed". Then the cost of Labor and (FOH) Factory Overhead added in cost of material consumed. The total of this is called "Total Factory Cost" after that Opening stock of work in process is added and closing stock of work in process is deducted from Total Factory Cost. The amount which drives after this is called "Cost of Goods Manufactured". Lastly the Opening Stock of Finished Goods is added and Closing Stock of Finished Goods is deducted from Cost of Goods Manufacture and the Answering amount is Called "(CGS) Cost of Goods Sold"

Senin, 04 Juni 2012

Working With an Accounting Firm

When tax season rolls around, whether you are filing a w-2 as a private filer, 1098 for self-employed status, or any other forms as a business owner, you have to know where and what to file; for these, and other reasons, you should consider working with a professional accounting firm when the time rolls around for you to begin considering what you will do during tax season. Choosing the right accounting firm is just as important as timely filing, and disclosing all information accurately, so you do have to take some time to find the best firm when you are ready to file.

Consider Your Status

Depending on whether you are filing a basic w-2, or whether you are self-employed, own a business, or are filing under any other status, there are going to be different filing rules for each individual or each entity. Therefore, you must first determine what you are, and what category you fall under, in order to ensure you do find the very best accounting firm to take on your taxes and filing, when the time comes for you to file your taxes with the IRS and any state taxes that you have to file.

Reliable Firms

As a customer, you want to make sure that the accounting firm you work with, is reliable and stands behind their work. When choosing the firm you should consider:

- their expertise, the type of customers they file for, and how long the firm (or private accountant) has been in business;

- the type of clients they work with (private filers, big or small business, etc);

- how many tax forms they do annually, in order to find the most reliable firms;

- the guarantees that are made, and whether the accounting firm is going to stand behind their filing in the event of an audit;

- how many deductions they are going to find for you when the time comes to file; and,

- how much you are going to be charged to file, when the time comes for you to decide on the firm or the private accountant, when tax season rolls around and it is time to pay taxes at the state and at the federal level.

With so many national firms, small local firms, and private accountants to go with, there are no shortages of getting great business if you want to ensure your taxes are properly filed. Although you can use online tax software, these very rarely provide a guarantee in the event you are audited, so if something is done incorrectly, you might be dealing with great repercussions. To avoid this, it is well worth the fee you are going to be paying to the accounting firm, when you do choose to file with a firm as opposed to doing it on your own.

So, taking the time to hire the best firm, and the most reputable accountants, is something all filers should do. When you are ready to file, these are some of the factors you have to consider, to ensure you do choose the best accounting firm to work with.