ECONOMICS

Detailed explanation-1: -Financial accounting is the oldest branch of accounting but it also has some limitations. Cost accounting was developed to find the solutions of some of the limitations of financial accounting.

Detailed explanation-2: -The idea behind developing cost accounting was to negate the limitations of the traditional accounting system. So cost accounting will help the organization’s control costs and maximize efficiency, something financial accounting cannot offer. With time these scientific methods lead to standards being formed.

Detailed explanation-3: -Cost accounting is a form of managerial accounting that aims to capture a company’s total cost of production by assessing the variable costs of each step of production as well as fixed costs, such as a lease expense. Cost accounting is not GAAP-compliant, and can only be used for internal purposes.

Detailed explanation-4: -The limitations of financial accounting can be overcome by using a spreadsheet or desktop app. This way, you can take into account the time value of money and use different depreciation methods. A desktop application that specializes in tracking business finances is Bookkeeper.

Detailed explanation-5: -Cost accounting focuses purely on a business’s costs, while financial accounting combines this information with other items, like revenue, liabilities, and shareholder equity, to provide a comprehensive look at a company’s finances. Both cost and financial accounting are used to track elements of a business’s finances.