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.
These transactions are summarized in the preparation of financial statements, including the balance sheet, income statement and cash flow statement, that record the company’s operating performance over a specified period.
A public company’s income statement is an example of financial accounting.
3. FINANCIAL
ACCOUNTING :
1. 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.
2. These transactions are summarized in the preparation of
financial statements, including the balance sheet, income
statement and cash flow statement, that record the company’s
operating performance over a specified period.
3. A public company’s income statement is an example of
financial accounting.
4. MANAGEMENT
ACCOUNTING:
1. Managerial accounting, also called management accounting,
is a method of accounting that creates statements, reports,
and documents that help management in making better
decisions related to their business’ performance. Managerial
accounting is primarily used for internal purposes.
2. Some of the primary examples of managerial accounting
include: Product costing and valuation.
5. COST
ACCOUNTING:
1. Cost accounting is a process of assigning costs to cost objects that
typically include a company’s products, services, and any other
activities that involve the company.Cost accounting involves
determining fixed and variable costs. Fixed costs are expenses that
recur each month regardless of the level of production.
2. Examples include rent, depreciation, interest on loans and lease
expenses.
6.
7. CASE STUDY
Saksham Ltd. A firm manufacturing textiles, wished to diversify
their business. They were considering two options, either to
diversify into manufacturing tooth-paste or switches. They wanted
to invest in the purchase of land, to set up a manufacturing unit in
the backward areas of Gujarat, which would also lead to the
generation of employment opportunities in the area, but only after
fulfilling all legal requirements and taking appropriate steps to
ensure that the environment was not polluted. The finance
manager of the company, Mr. Ramakant was asked by the
management to prepare a report on the factors which should be
considered while making the above investment decision.
8. QUESTIONS
A. State any two factors that Mr. Ramakant would
give in his report.
B. Also state any one reason which makes it
important for the above decision to be made
carefully.
C. And state two values being fulfilled by
Saksham Ltd.
9. ANSWERS
A. Factors that should be kept in mind by the company
while making the investment decision:
1.The amount of cash flows should be carefully
analyzed before considering the decision.
2. The decision to invest in a particular project involves
a number of calculations regarding the amount of
investment, interest rate, cash flows and rate of return.
10. B. The following are the reasons that make the above decision to be
made carefully:
1. These decisions have a bearing on the long term growth.
2. These decisions once taken, are not reversible without incurring
heavy losses.
C. Following are the values being fulfilled by Saksham Ltd:
a. Responsibility
b. Respect for law and order
c. Sensitivity to environment
d. Development of backward regions.
e. Generating employment opportunity