Marginal accounting and financial accounting both are used for providing useful information to the interested parties. Financial accounting is independent branch of accounting but marginal accounting is the part of cost accounting. Following are the differences.
● Items
In financial accounting, we record, analyze and summarize the financial transactions. These transactions are summarize in the form of assets, liabilities, incomes and expenses. In marginal accounting, we have to analyze them more for better cost decisions. We divide our expenses into fixed cost and variable cost. Difference between sales and variable cost will be contribution.
● Net Profit
Marginal costing deals in short run. Difference between sales and variable cost is contribution. Difference between contribution and fixed cost will be net profit. In financial accounting, we calculate the net profit on the basis of long run. We take only revenue expenses for calculating net profit. Net profit is the difference of total revenue and revenue expenditures. All capital expenditures are also fixed cost but these are not deducted in income statement.
● Objective
Marginal accounting is very important for cost volume profit analysis. Fixed cost will be fixed at every level of output. But variable cost will be changed due to changing in output. So, contribution is calculated at different level of output. It is used for break even analysis.
Financial accounting provides the income statement and balance sheet. On this basis, many interested parties take decision.
Related : Application of Marginal Costing in Managerial Decisions
● Items
In financial accounting, we record, analyze and summarize the financial transactions. These transactions are summarize in the form of assets, liabilities, incomes and expenses. In marginal accounting, we have to analyze them more for better cost decisions. We divide our expenses into fixed cost and variable cost. Difference between sales and variable cost will be contribution.
● Net Profit
Marginal costing deals in short run. Difference between sales and variable cost is contribution. Difference between contribution and fixed cost will be net profit. In financial accounting, we calculate the net profit on the basis of long run. We take only revenue expenses for calculating net profit. Net profit is the difference of total revenue and revenue expenditures. All capital expenditures are also fixed cost but these are not deducted in income statement.
● Objective
Marginal accounting is very important for cost volume profit analysis. Fixed cost will be fixed at every level of output. But variable cost will be changed due to changing in output. So, contribution is calculated at different level of output. It is used for break even analysis.
Financial accounting provides the income statement and balance sheet. On this basis, many interested parties take decision.
Related : Application of Marginal Costing in Managerial Decisions
I think u need to go first through IAS of accounting...
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