Lesson-2 on Accounting

Question: What is Cost Driver?

Answer

A "cost driver" is the unit of an activity that causes the change of an activity cost.

Question: What is Activity Base Costing?

Answer:

Activity-based costing (ABC) assigns more indirect costs (overhead) into direct costs. It is a costing model that identifies activities in an organization and assigns the cost of each activity resource to all products and services according to the actual consumption by each.

Question: What is the difference between Financial Accounting & Management Accounting?

Answer:

Financial Accounting

Ø Financial Accounting is the process of summarizing financial data taken from an organization's accounting records and publishing in the form of annual (or more frequent) reports for stakeholder of  the organization

Management accounting

Ø Management Accounting is concerned with the provisions and use of accounting and other information to managers within organizations, to provide them with the basis in making informed business decisions.

Question: What is the difference between Cost Accounting and Management Accounting?

Answer:

Ø Cost accounting is just analysis of financial accounting data for fixation total cost and price of product and control on cost.

Ø Management accounting is analysis of financial and cost accounting for management of business or different plans and policies. Cost Accounting actually operates within Management Accounting.

Question: What is differential Cost?

Answer:

A difference in costs between any two alternatives is known as differential cost.

Question: What is differential Revenue?

Answer:

A difference in revenues between any two alternatives is known as differential revenue.

Question: What is the difference between Job Order Costing and Process Costing?

Answer:

Ø Job costing deals with the cost determination of every orders or jobs, it is suitable in a production environment where each new order is different from the earlier or succeeding order.

Ø Process costing determines the cost per unit of product in an environment where identical product is produced for all customers.

Question: What is the difference between Cost and Expense?

Answer:

Ø Cost is the total money, time and resources associated with a purchase or activity for  revenue-generating activities. A cost might be an expense or it might be an asset.

Ø An expense is a cost that has expired and charged in the firm's income statement as deductions from the income.

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