- Accounting is recording of all the day to day financial transactions in the books of accounts leading to preparation of financial statements. On the other hand, Auditing is the critical examination of the transactions recorded in the books of accounts and makes a reasonable assurance.
- Accounting is concerned with finalization of accounts and ready to make financial statements. On the other hand, Auditing is concerned with establishment of reliability of financial statements by making a reasonable assurance by auditors.
- The objective of accounting is to ascertain the trading results of financial transactions. But the objective of auditing is to certify the correctness of financial statements prepared by the management.
- Accounting starts when book keeping ends. On the other hand, Auditing begins when accounting records.
- Accounting involves various financial statements for example, balance sheet, income statement, cash flows statement. Whereas, auditing depends upon the agreement or upon the provisions of law adopted by the regulatory authority.
- Accounting involves maintenance of books of accounts. And Auditing is more than maintenance of books of accounts.
A comparison between the financial accounting and management accounting may have differences in its respective field. The basic differential points are as follows: In financial accounting, financial statements are mainly meant for outsiders such as shareholders, debenture holders, creditors, and government agency. On the other hand, in management accounting necessary statements are prepared mainly for …View full post
Depreciation: Depreciation is the systematic process of allocating the depreciable amount of an asset over its useful life. Depreciable amount is the cost of an asset, less its residual value. Depreciation must be charged from the date the asset is available for use in the production process and able to give support to production facility. …View full post
Liquidity Ratios: Liquidity ratios measure a firm’s ability to meet cash needs as they arise. That is the liquidity ratios examine the short-term solvency. Some major liquidity ratios are as follows. Current Ratio: the best-known liquidity measure is the current ratio, which examines the relationship between current assets and current liabilities. Quick Ratio: Some financial …View full post
Activity ratios are those which measure how effectively a firm is managing its assets. That is, they reflect the assets turnover through which the performances of the assets are measured. Activity ratios indicate how much a company has invested in a particular type of asset relative to the revenue the asset is producing. Activity ratios …View full post
Cost-volume-profit (CVP) analysis is a key step in many managerial decisions. CVP analysis involves specifying a model of the relations among the prices of products, the volume or level of activity, unit variable costs, total fixed costs, and the sales mix. CVP analysis model is used to predict the impact on profits of changes in those …View full post
Nov 17 2012
Difference between Accounting and Auditing
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