Financial Accounting; The five things the accounting sector should know, because it was one of the first to bring an impact of advancements in data technology.
If you’re planning to pursue a career in accounting, management, finance, economics, or any other related field, you should understand the learning process of the fundamentals of accounting can provide the framework you need to achieve success.
Here are five basic concepts that can help you understand some key accounting principles.
- Cost Accountancy
- Management Accounting
- Financial Planning Model
- Limitations of Financial Accounting
- Inventor-able Costs
Its process a business process in which they can record, examine, summarize, study and understand the company’s cost basically spent on any process, services, products or anything other thing needed in the organization.
This can basically help the organization in a better way to keep a track on their cost controlling and making strategic planning and decision on improving cost efficiency.
Cost Accountancy can help us with financial statements and ledgers, which can help give them the management visibility on their cost information.
It helps the management team to understand how to take control over the cost, like where to increase and where to decrease more, which can help to have a clear vision for future plans.
- Cost Accounting is a process in which we can determine the costs of goods and services. It involves the recording, classification, allocation of various expenditures, and creating financial statements. This data is generally comes into use in financial accounting.
- This process can helps us calculate the costs of the various goods in an organization. It involves a suitable presentation of this data for the purposes of cost control and guidance to the management.
- It can deal with the cost of every unit, job, process, order, service etc. Anyone that is applicable and includes the cost of production, cost of selling and cost of distribution.
Management Accounting is the process of analyzing the business costs and operations. It can help prepare the internal financial reports, records, and account to aid manager’s decision making process to achieve business goals for the organization.
- It can help in making of the financial and costing data then translating that data into useful information for management and other officers within an organization.
- Management Accounting helps involve the presentations of financial information for internal purpose.
- Management Accounting date can be modified by the presentation for specific needs of its end user.
- It encompasses many facets of accounting which includes product costing, budgeting, forecasting, and various financial analysis.
Financial Planning Models:
It is a process of creating a summary for a company’s expenses and earnings in the form of spreadsheet. It also comes into use to calculate the impact of a future event or decision. Financial modeling is a representation in numbers of some or all aspects of a company’s operations.
- Its models are basically created to help executives to explore the results of various kinds of business strategies.
- Planning models do allow executives to forecast financial statements.
- Models statements are also comes into use to to create a model with financial information and market data.
Limitations of financial Accounting:
Limitations of financial accounting services are one of those factor that a user should be aware of before using it or relying over it for an excessive extent.
- These factors can result in a reduction of investment funds in a business for an organization.
- Transactions are initially recorded at such cost.
- When reviewing the balance sheet, the values of assets and liabilities might change over the time.
- Market securities are altered to make changes in their market values. Other items such as fixed assets do not charge.
- Financial statements are useful documents. It can help to be aware of preceding issues before relying over them too much.
Inventor-able Cost – Financial accounting:
Inventor-able cost can become a part of inventories. Such as raw materials, work in progress and fined goods inventory presents in the balance sheet of any business. While the product is being manufactured these costs are incurred but all these are not expensed or profit and loss account in the same period.
Once these inventories become finished goods the inventor able costs transform into the cost of goods sold and thereby a part of profit.
- It can become parts of any of these inventories – RM, WIP & FG
- It also becomes a balance sheet in the form of inventories on the asset side.
- Inventor able costs also exist in the manufacturing and trading concerns only.
- It becomes a part of three inventories such as – raw material, work in progress and finished goods.