Fundamentals of Accounting Accounting and Finance Repository

Both standard costing and budgetary control achieve the same objective of maximum efficiency and cost reduction by establishing a predetermined standard, comparing actual performance with the predetermined standard and taking corrective measures, where necessary. Thus, although both are useful tools for the management in controlling cost, they differ in the …

The marginal costing is a technique of an accounting which may be defined as, “the ascertainment of cost by differentiating between fixed cost and variable cost of marginal cost and of the effect on profits of changes in the volume of the type of output”. Marginal costing distinguishes between fixed …

A cost object is anything for which a separate measurement of costs is desired. Examples include a product, a service, a project, a customer, a brand category, an activity and a department. Manufacturing departments are either considered as cost pools of cost objects, depending upon whether management’s focus is on …

It is most important to realise that the depreciation concept is not designed to provide a means or method to replace ageing assets. Depreciation is not intended to be a ‘savings-scheme’ by which the company can fund purchases of new assets. Many non-accountants believe that depreciation creates a fund which …

Introduction Suppose you are a sole proprietor and you take copies of your books of account to 3 different accountants. You ask them to prepare the financial statement on the basis of the records and ascertain the profit of the business for the year. After few days when they will …

The following are the various points of difference between absorption costing and marginal costing.   Absorption Costing Marginal Costing 1. All  costs fixed and variable included for ascertaining 1. Only variable costs are included. Fixed costs are recovered fromcontribution. 2. Difference unit costs are obtained at different levels of output …

Accruals and prepayments lie at the heart of the double-entry bookkeeping system and modern financial accounting. The accruals concept is often used to refer to both accruals (outstanding or unpaid expenses) and prepayments (payments in advance). You may remember that earlier in this part we discussed some of the accounting …

On the basis of the Fundamental Accounting Assumption of Going Concern, assets are classified as Fixed Assets and Current Assets. Fixed assets are used in the business to drive benefits for more than one accounting period. Periodic profit is measured by charging cost against periodic revenue. Since fixed assets are …