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Cost Accounting Videos 27 videos

Cost Accounting: What is a Cost: Cost Versus Expense?
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What is a Cost: Cost Versus Expense? Cost and expense are pretty similar terms when looking at traditional definitions but they’re a little diffe...

Cost Accounting: How Can Unit Fixed Costs Mislead the Misled?
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How can unit fixed costs mislead the misled? Unit fixed costs can be misleading because the fixed cost per unit decreases as production increases;...

Cost Accounting: What Is Differential Analysis?
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What is Differential Analysis? Differential analysis is a strategy used to make the best decision. Possible choices are compared to determine which...

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Cost Accounting: What is the Difference Between Cost Accounting and Financial Accounting? 0 Views


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Description:

What is the difference between cost accounting and financial accounting? Cost accounting is the type of accounting that determines how to account for costs that are a result of producing whatever a business makes. Financial accounting is the type of accounting that calculates financials for the company to determine if they are profitable and things like that.

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Transcript

00:00

And finance Allah shmoop What's the difference between cost accounting

00:05

and financial accounting Cost accounting is like the diary you

00:10

keep locked up under your bed Financial accounting is like

00:14

the memoir you publish later Cost accounting It's all the

00:17

texts you and your best friend exchange talking about the

00:20

people you people date Financial accounting It's the speech you

00:23

give at their wedding Well basically comes down to a

00:26

matter of audience and perspective Cost accounting targets and internal

00:30

audience other people at the same company In other words

00:34

cost accounting provides financial details for people inside of an

00:37

organisation Teo do it better organize it better run it

00:40

Better manage Better yet the margins for various products Yeah

00:43

how do we optimize those The amount spent on private

00:46

jet wax in a year How do we minimize that

00:48

the expenses related to building the secret underground layer where

00:52

you'll launch your bid for world domination with pinky and

00:55

or the brain Yeah things of that nature Well managers

00:57

and executives can use the data to make decisions The

00:59

goal is to identify the amount that various items cost

01:02

You know labor raw materials advertising sales margarita machines in

01:06

the break room cost accounting also looks at how much

01:08

each of those expenses contributes to the eventual bottom line

01:12

Like do we actually need those expenses are the efficient

01:15

Could we get him elsewhere Many Buffalo Man works in

01:20

the accounting department at Little Thrones Inc The leading provider

01:23

of toilets for doll houses They have three models of

01:25

toilets A little dropper the original Little Throne Classic and

01:29

a little thrown X L You know for the big

01:31

and proud set The little dropper has sales of five

01:34

hundred thousand dollars and earns an operating profit of two

01:36

hundred seventy five grand You very high margin business It

01:39

has an operating margin there of fifty five percent Well

01:42

the classic little throne brings in revenue of eight hundred

01:44

thousand and it contributes three hundred thirty six thousand to

01:47

the bottom line Operating margins forty two percent Well the

01:49

throne Excel has sales of just three hundred fifty thousand

01:52

but the operating margins are the highest among the three

01:55

product lines at sixty five percent That allows it to

01:58

produce an operating profit of two hundred twenty seven thousand

02:00

five hundred dollars Well based on this information Benny recommends

02:04

the bigger marketing push for the throne X l if

02:06

he can drive sales volumes higher for that product more

02:09

of that money end up on the bottom line Well

02:11

that kind of analysis represents cost accounting detailed information for

02:14

people in the company meant to help make good decisions

02:17

The info means to be forward looking like a Magic

02:20

eight ball made of numbers The goal is to optimize

02:22

what's going to happen now to financial accounting It gives

02:27

information about the company's fiscal health for an external audience

02:30

like people outside the firm people like investors and debt

02:35

lenders and regulators It includes things like the Ten Cave

02:39

A ten Q and the annual report filings You know

02:42

the documents investors and regulators pore over to see how

02:46

well or poorly the company is doing Financial accounting also

02:49

includes documentation for audits Mess it up and suddenly there

02:53

are people wearing SEC windbreakers in your office confiscating your

02:57

computer And if things go badly while you end up

03:00

restating results and well then sometime in the future you

03:03

send your stock into a tailspin and possibly send the

03:06

company into bankruptcy so you don't want to mess with

03:08

the SEC time to announce the little thrones Quarterly results

03:11

The Wall Street Benny and the management team don't want

03:13

to give away too much information but they need to

03:16

let their shareholders know how the company is doing so

03:18

when they issue their report they don't break it down

03:20

by product They give the total quarterly revenue one point

03:24

six five million dollars and the total quarterly operating profit

03:27

of eight hundred thirty eight thousand five hundred dollars And

03:29

those numbers together produce an overall operating margin of fifty

03:33

point eight percent But they keep the other details within

03:35

the company Nothing about the individual products nothing about the

03:38

secret world domination layer because it gets sent to outsiders

03:42

Will the financial accounting info tends to be less detailed

03:45

than the cost accounting figures It's just enough to get

03:47

a picture of a company's financial situation without giving away

03:50

too much And you know there are competitors and evil

03:52

people out there right So you keep Mum different audience

03:55

Different goal Also financial accounting has a backward looking vibe

03:59

Executives use cost accounting toe optimize production going forward Financial

04:04

accounting is more of a record of what's already happened

04:06

You know they're reporting it It's basically closing the books

04:09

on any given time period Think of it this way

04:11

Cost accounting is like a detective's notes that he takes

04:14

while trying to solve a mystery Financial accounting is like

04:17

the true crime book he publishes Based on those notes

04:20

he uses the notes to solve the case in the

04:22

book while just sums everything up and you know provides

04:25

a way to cash in All right another way to

04:27

look at it Every year the Buffalo Man send out

04:29

a year end news letter to all the friends and

04:31

family on their Christmas card list It includes stuff like

04:33

we're so proud of Bernie for getting an A in

04:36

biology this year And we're so happy that Beatrice got

04:40

her driver's license last month And well for Buster's latest

04:45

trip to rehab finally does the trick You know things

04:48

like that Think of that kind of reporting is the

04:50

family communication equivalent of financial accounting Everything boiled down on

04:54

Leah's Much information is you know necessary Meanwhile Benny Buffet

04:58

Man keeps a diary and you know it includes stuff

05:00

like Bernie originally got a C minus in biology but

05:04

I threatened to sue the school so they upped it

05:06

to a C and well Beatrice almost sideswiped a school

05:10

bus during her third attempt on the driving test But

05:12

I slipped the guy the D M V of fifty

05:14

and well they let it slide Think of those examples

05:16

like cost accounting more detailed different audience And Benny is

05:19

well just writing it for himself An internal audience like

05:22

his confessional riel sausage getting made type of information What

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