Budget provides comprehensive financial overview of planned company operation. A company’s objectives budget is the overall financial plan showing expenditure of the available funds. A company’s budget is driven by the aims and objectives of the company as well as what it can actually accomplish. Many variables in a business can be budgeted which includes sales, output, cost- (variable and fixed), profits, cash flow, capital investment. Budget should be SMART, that is specific, measurable, achievable, realistic, and with time bound otherwise budget will be ineffective. Strategic objective of the company is the first factor that needs to be considered when formulating budgets because unaligned budget with strategic objective lead to failure. The next step of budgeting is identifying the limiting factor that the organization is faced with which is known as constraint which may be a limit on the number of goods a business could sell (demand is limiting factor)Continue reading
Accounting Basics
Objectivity in Accounting
Financial accounting can be defined as a process of designing and operating an information system for collecting, information in order to make financial decisions. It is said to collect accurate financial data and other financial information, and to accumulate and combine it in an organized and systematic way, according to the principles and rules of accounting, for reporting purpose. Financial accounting is objective in the sense that it is not biased which means it is true and fair in review. It is very importance for any organisation because the information gathered through financial accounting can be used to make financial or economic decision making. One of the purposes of financial accounting is to provide information about the performance of the company to external people as well as internal managers within the organisation. The external people can be in form of stakeholders, creditors, suppliers, tax authorities etc. The financial information gatheredContinue reading
Relationship Between Finance and Accounting
Finance can be defined as the art and science of managing money. Virtually all individuals and organization earn or raise money and spend or invest money. Finance is concerned with the process, institutions, markets and instruments involved in the transfer of money among and between individuals, business and governments. Finance, in another word, can be defined as the management of the flows of money through an organization, whether it be a corporation, school, bank, or government agency. Finance concerns itself with the actual flows of money as well as any claims against money. Finance is regarded as the life-blood of the business unit. This function involves planning, procurement and effective utilization of the funds of the business. Accounting is the methodical or precise recording, reporting, and assessment of financial deals and transactions of a business. Accounting also involves the preparation of statements or declarations concerning assets, liabilities, and outcomes ofContinue reading
The Future of Accounting Profession
In today’s business environment professional accountants are directly responsible to their customers, companies and to the society and also they should know possible legal obligations to the stakeholders. Accounting profession is not only limited to preparing accounting statements but also involves in wide variety of functions which provides inputs to the managerial decision making. If an accounting professional is not able to perform his duty and responsibilities in satisfied level according to the universal standards it is the major liability in the hands of an accountant. Compared to other type of professions this profession has its own code of ethics hence it is dignified and respective profession which provides practical inputs for the effective decision making. In the context of professional accounting, the power and responsibility of an accountant can be justified when financial statements provides expected information according to the objectives functions especially protection of public and social interest.Continue reading
Accounting Concepts Used for the Preparation of Financial Statements
Basic accounting concepts used for the preparation of financial statements are: Money measurement concept – Accounting normally deals with only those items that are capable of being expressed in monetary terms. Money has the advantage that it is a useful common denominator with which to express the wide variety of recourses held by a business. However, not all such resources are capable of being measured in monetary terms and so will be excluded from a balance sheet. The money measurement concept, thus, limits the scope of accounting reports. Historic cost concept – Assets are shown on the balance at a value that is based on their historic cost (that is, acquisition cost). This method of measuring asset value has been adopted by accountants in preference to methods based on some form of current value. Many commentators find this particular convection difficult to support as outdated historic cost are unlikely toContinue reading
Similarities and Difference between Job Costing and Batch Costing
Job Costing Method is one of the costing methods that analyze the cost of the job. This system considers job as a cost unit which contains a sole order, individual project or contract. This is an isolation of the entire time, material and costs to a sole order or job. This cause for gathering and covering on the expenses and income connect with particular projects or job. Some customers will not order the all product, but they will just order for getting required job. Hence it is essential to discover out that job order’s expenditure throughout this method. Batch Costing method is a modified type of job costing. Batch costing method is using by companies whose products are simply recognized by batches. In here batch of identifiable products are concerned as a sole job among unit price. Simply this is a method whereby recognize units produced are concerned as aContinue reading