Fraud, forgery, and misappropriation of money are reduced by keeping cash book scientifically and accurately. Accounts Receivable Accounts receivables describe the accounts for customers who owe the company money. Accounting standards when used give a sense of faith and reliability to various users. The various persons and parties interested in the business, like, the Government, public, investors, Money-lenders, Researchers etc. If the assets exceed liabilities, it is financially healthy, i. Forms and rulings are essential for a costing system but they must be revised and brought up-to-date in the light of altered conditions.
The nature and amounts of possible losses. The arithmetical accuracy of accounts kept in the ledger can be assured by. So, Accounting Theory and Accounting Practices are very closely related-so close as not to be separated. Thus, cost accounting relates to the collection, classification, ascertainment of cost and its accounting and control relating to the various elements of cost. Hence, the contents of profit and loss account and are modified and rearranged in such a manner that helps the management for taking decision through various techniques. The principles may be modified as and when required but then also, a distinct and definite proposition and logical explanation ending in a conclusive proof is necessary. Regarding Finance, or financial matters, a man is always extra cautious and so, he never makes any financial transaction without any reason.
The accounting profession is no different. This process is designed to accurately reflect business activity, help companies meet legal, fiscal and statutory requirements, present financial accounts to business owners, allow for in-depth financial analysis, and facilitate efficient resource allocation. Cost saving could be a temporary affair and may be at the cost of quality. But a subject of Arts is never, like that. Timely Payroll The accounting department is responsible for managing and updating all payroll information for existing employees in a given business. Thus a combination of reality and imagination constitutes a subject of Arts.
So then, theories also ought to be changed. Here one has mix-up his imagination with practical reality. One objective is to provide accurate payroll information and payments to employees. But it should be remembered that it is not a pure science or a complete science because, like general science or Natural Science, the principles of accounting are not always all-proof. Cost accounting can be used to identify possible inefficiencies or areas of necessary improvement to control costs. In fact, all the interested persons in a society, like Debtors, Creditors, Investors, Money-lenders, Bankers, Governments, Tax-collectors, Economists, Researchers, etc.
Agreement of a trial balance is the proof of the arithmetical accuracy of accounts. Determination and evaluation of policy The object of Accounting is to help the management in determining and evaluating the management policies in running the business successfully by supplying necessary, information, interpreting and analyzing the financial statements. It explains the causes and effects of the day-to-day events of our life. Valuation of various assets and liabilities can be more or less accurately if the accountant has the knowledge of accounting theory. Firms want to be able to spend less on their inputs and charge more for their outputs.
In the absence of accounting there would have been terrific burden on human memory which in most cases would have been impossible to bear. It shows us the future way of behavior regarding the happening of any special phenomenon. To furnish information regarding Purchases and Sales, both Cash and Credit. It's difficult to make informed business decisions without accurate financial data that helps you see where you are, where you've been and trends that may determine where you're headed. For example, raw material costs and inventory prices are shared between both.
It includes the ascertainment of the cost of every order, job, contract, process, service or unit as may be appropriate. Generally accepted accounting principles, widely used customs, conventions, doctrines, procedures and postulates constitute accounting theories. Verifiability Different knowledgeable and independent observers reach similar conclusions. Accounting information is also required by different types of users internal or external , who may need the same for decision making. An accountant, fully equipped with the knowledge of accounting theory, can easily help the management in an effective manner by supplying proper accounting information at the proper time. Balance Sheet: It is easy to understand the financial position of a company when a proper balance sheet is maintained by the accountant or any other individual of a company.
The nature and amount of incomes. Valuation of various assets and liabilities can be more or less accurately if the accountant has the knowledge of accounting theory. More meaningful information is supplied to all levels of management executives. Cost accounting buoys decision making because it can be tailored to the specific needs of each separate firm. To supply useful data to management for taking various financial decisions such as introduction of new products, replacement of labour by machine etc. Because end users are often provided with financial information that spans various periods of time, it is important for these users to be able to compare information across financial periods.
He is to face various debts and liabilities like accounts payable, notes payable, loan, bank overdraft etc. To calculate the cost of productions. However, we can consider the following definitions: 1. Thus, cost accounting has the following features: 1. The development of cost accounting in India is of recent origin and it started gaining importance after the independence of the country when the Indian Government started laying emphasis on the industrial development of the country. But in many cases some methods of costing can always be devised to suit the requirements of the business.
The nature and values of liabilities outstanding. Accounting Theories are similarly based on sound reasoning. Theories are considered to be the pillars on which the whole structure of accounting stands. Present day business is full of diverse Socio-economic problems. Keeping accounts of cash is a prominent book of the books of accounts.