Showing posts with label Accounting. Show all posts
Showing posts with label Accounting. Show all posts

Difference Between Management Audit And Financial Audit

Accounting , Finance
Introduction And Meaning Of Management Audit

Management audit is a process of examining the performance and managerial efficiency in the organization. It evaluates the performance of all levels of management and helps to find out the deficiencies and defects. It provides proper suggestions and guidance for maintaining better organizational structure that helps to achieve organizational goals and objectives.

Introduction And Meaning Of Financial Audit

Financial audit is a process of analyzing the financial affairs of the firm. It helps to detect the errors and frauds in the book of accounts. It reports the financial performance (profit or loss and financial position) of the business. It is helpful for the  management to make future financial plans and policies.

Difference Between Management Audit And Financial Audit


The major dissimilarities or difference between management audit and financial audit can be highlighted as follows:

1. Introduction

Management Audit: It is an act of evaluating and analyzing the efficiency of each level of management such as decision making power, employee relation and competencies of management.
Financial Audit: It is an act of examining and analyzing company's financial aspects such as financial statements, vouchers and books of accounts to ensure the accuracy and validity.

2. Nature

Management Audit: It is qualitative in nature because it evaluates non-financial aspects of the firm.
Financial Audit: It evaluates only financial aspects of the business. So, it is quantitative in nature.

3. Compulsion

Management Audit: It is not compulsory to conduct management audit.
Financial Audit: Every manufacturing and mining companies should conduct financial audit.

4. Objective

Management Audit: The main objective of management audit is to measure effectiveness, quality of decision making and executive performance of management.
Financial Audit: The main objective of financial audit is to ensure arithmetical accuracy and fairness of books of accounts of the company.
difference-management-financial-audit

5. Useful For

Management Audit: It is useful for top level management and proprietors to measure actual performance with predetermined standards. 
Financial Audit: It is useful for shareholders and investors to know the financial position of the company.

       Also Read: 

6. Performed By

Management Audit: It is performed by a team of employee and independent consultant appointed by the management.
Financial Audit: It is performed by a professional chartered accountant.

7.  Conducting Period

Management Audit: It can be conducted at any time as per the need or wish of the company.
Financial Audit: It is conducted at the end of accounting period after the preparation of financial statements.

Management Audit Vs Financial Audit (Comparison Chart)

Basis
Management Audit
Financial Audit
Introduction
Act of evaluating performance of each level of management
Act of evaluating the correctness of the books of accounts of the firm
Nature
Qualitative
Quantitative
Compulsory Or Not 
Not compulsory
It is compulsory
Objective
To measure the strength or weakness of management
To ensure the arithmetic accuracy of the books of accounts
Useful For
Management or proprietors 
Shareholders or investors
Conducted By
Team of employees and consultant
Professional chartered accountant
Period
As per the need of the company
At the end of accounting period.

Distinction Between Management Audit And Financial Audit In Short:
- Management audit evaluates the operational efficiency, but financial audit evaluates the financial records of the business.
- Management audit finds out the weakness and deficiencies of  organizational procedures and processes, financial audit detects the errors and frauds in the accounting process. 
- Management audit can be performed as per the wish of the top level management. But Financial audit should be conducted after the preparation of financial statements at the end of the financial year.
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Difference Between Cost Audit And Financial Audit

Accounting , Business
Introduction To Cost Audit

Cost audit is a process of examining the cost records and statements to ensure the accuracy and to evaluate the operational efficiency of the company. It analyzes cost records, accounts and cost documents that helps to identify the areas of improvement.

Introduction To Financial Audit

Financial audit is a process of examining and verifying the financial transactions recorded on the company's books of accounts and financial statements. It helps to ensure the accuracy, reliability and validity of firms's financial records such as vouchers, financial documents and records.

Difference Between Cost Audit And Financial Audit 

The main dissimilarities or difference between cost audit and financial audit can be highlighted as follows:

1. Introduction

Cost Audit: It is the act of examining cost aspects (cost records and cost statements) of the firm in order to ensure the accuracy.
Financial Audit: It is the act of examining financial aspects (financial statements, books of accounts and vouchers) in order to ensure the correctness and validity of transactions.

2. Performed By

Cost Audit: Auditing task is performed by a competent cost accountant appointed by the management or board of directors.
Financial Audit: Auditing task is performed by a professional chartered accountant appointed by investors or shareholders.

3. Objectives

Cost Audit: The main purpose of conducting cost audit is to verify cost records and to analyze operational efficiency of the firm.
Financial Audit: The main purpose of conducting financial audit is to ensure the correctness and fairness of financial statements and other books of accounts.

4. Compulsion

Cost Audit: All companies should conduct cost audit because it is compulsory for all types of organizations.
Financial Audit: It is compulsory for manufacturing companies only.
difference-cost-financial-audit

5. Useful For

Cost Audit: It is useful for the management.
Financial Audit: It is useful for shareholders or investors.

       Also Read: 

6. Submission Of Report

Cost Audit: Report of cost audit is submitted to the board of directors.
Financial Audit: Report of financial audit is submitted to the shareholders at annual general meet.

7. Suggestion

Cost Audit: It is forward-looking in nature. So, it provides suggestions for future by analyzing past performance.
Financial Audit. it is known as postmortem audit because it only evaluates past activities but does not provide any suggestion for future.

Cost Audit Vs Financial Audit (Comparison Chart)

Basis
Cost Audit
Financial Audit
Introduction
Act of examining cost aspects of the firm
Act of examining financial aspects of the firm
Performed By
Cost Accountant
Chartered Accountant
Compulsory
For all types of companies
Only for manufacturing companies
Useful For
Management
Investors
Submission Of Report
To the board of directors
To the shareholders
Purpose
To analyze operational efficiency
To ensure fairness and correctness of financial records
Provide Suggestions?
Yes
No


Distinction Between Cost Audit And Financial Audit In Short

- Cost audit is concerned with the verification of cost records and cost statements of the firm, but financial audit is concerned with the financial aspects such as financial statement and books of accounts of the firm.
- Cost audit can be conducted by a cost accountant. But financial audit is conducted by a chartered accountant.
- Cost audit analysis the operational efficiency of the organization. On the other side, financial audit examines the correctness of the books of accounts.
- Report of cost audit is useful for the management to identify the area of improvement. Report provided by financial audit is useful for investors and shareholders to know the financial strength of the company
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Difference Between Operating And Non-Operating Expenses

Accounting , Business
Introduction

Those costs which are incurred to perform daily business activities are known as operating expenses such as staffing costs, marketing and advertising costs, rent, salaries etc. On the other hand, non-operating expenses refer to those costs that are not directly related to the day-to-day business activities such as depreciation, interest, restructuring costs etc. 

Difference Between Operating Expenses And Non-operating Expenses

The main dissimilarities or difference between operating expenses and non-operating expenses can be described as follows:

1. Meaning

Operating Expenses: All costs incur to perform daily business activities (not cost of good sold) such as salaries, administrative expenses, advertising, rent etc. are known as operating expenses.
Non-Operating Expenses: Those costs which are not related to direct business activities such as interest payment, depreciation, restructuring costs etc. are known as non-operating expenses.

2. Predictable Or Not

Operating Expenses: These costs are essential for smooth functioning of regular business operations. So, operating expenses are predictable costs.
Non-Operating Expenses: These costs are not predictable because non-operating expenses are not related to daily business activities.

3. Controllable Or Not

Operating Expenses: These are controllable costs. Management can minimize operating expenses by using cost control and cost reduction techniques.
Non-Operating Expenses: These are uncontrollable costs. So, management cannot minimize non-operating expenses.

4. Occurrence Frequency

Operating Expenses: These costs incur regularly (more frequently than non-operating expenses) because these are directly related to business operation.
Non-Operating Expenses: These costs do not incur regularly like operating expenses because these expenses are not related to business operation.

5. Record In Income Statement

Operating Expenses: These costs are recorded at the top (under cost of goods sold) while preparing income statement of the firm.
Non-Operating Expenses: These costs are recorded at the bottom of the income statement.
difference-between-operating-non-operating-expenses


6. Examples

Operating Expenses: Salaries, operational expenses, rent, marketing costs, etc. are some examples of operating expenses.
Non-Operating Expenses: Interest payment, loss on sale of fixed assets, restructuring costs, depreciation amount etc. are some examples of non-operating expenses. 

Operating Expenses Vs Non-operating Expenses
(Comparison Chart)

Basis 
Operating Expenses
Non-Operating Expenses
Introduction
Costs that are directly related to daily business operation
Types of costs that are not related to daily business operation
Predictable
Yes
No
Controllable
Yes
No
Frequency
More
Less
Recording
At the top of income statement
At the bottom of income statement
Examples
Administrative expenses, salaries, advertising etc.
Depreciation, amortization, interest payment etc.

Distinction Between Operating Expenses And Non-operating Expenses In Short

- Operating expenses are directly tied to daily business operations. But non-operating expenses are not directly involve in operational activities of the firm.
- Operating expenses affect the profitability of the company. Non-operating expenses does not impact the profitability.
- Operating expenses are predictable. On the other hand, non-operating expenses cannot be predicted. 
- Operating expenses are posted on the top and non-operating expenses are posted on the bottom while preparing the income statement.
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Difference Between Bin Card And Store Ledger

Accounting , Business
Introduction

A document prepared by a storekeeper that records the quantity movement(receipt, issue and remaining balance) of material is called bin card or stock card. On the other hand, store ledger or subsidiary ledger refers to the document or record prepared by  cost accountant that shows both quantitative (number value) and qualitative (monetary value) movement of materials and supplies.

Difference Between Bin Card And Store Ledger

The main dissimilarities or difference between bin card and store ledger can be highlighted as follows:

1. Meaning

Bin Card: It is a stock record that contains quantitative movement (receipt, issue and balance) of materials.
Store Ledger: It is a document that contains both quantitative and qualitative (monetary value) movement of materials.

2. Also Called

Bin Card: It is also called 'stock card'
Store Ledger: It is also called 'subsidiary ledger'

3. What Is It?

Bin Card: It is a rough recording of materials movement.
Store Ledger: It is detail and up to date recording of material movement.

4. Recording Of

Bin Card: It records the quantity or volume of materials such as how much materials received, how much issued and how much remained in the stock
Store Ledger: It records the quantity (volume) and monetary value of stock received, issued and remained.

5. Prepared By

Bin Card: It is prepared and maintained by store department and storekeeper is a responsible person.
Store Ledger: It is prepared and maintained by accounting department and cost accountant is a responsible person.

6. Skill And Knowledge

Bin Card: No special knowledge or skill is required to maintained bin card.
Store Ledger: Some accounting knowledge and skill is required to maintain store ledger.

7. Interdepartmental Transaction

Bin Card: It does not record interdepartmental transactions.
Store Ledger: It shows interdepartmental transactions.
difference-between-bin-card-store-ledger


8. Posting/Entries

Bin Card: Posting or entries are done before transaction.
Store Ledger: All entries are made after transactions.

9. Individual Transaction

Bin Card: It shows each and every transaction because it is updated after each transaction.
Store Ledger: It does not record individual transaction because it is updated periodically.

10. Place

Bin Card: It is maintained and placed in the store.
Store Ledger: It is maintained and placed in accounting department.

Bin Card Vs Store Ledger (Comparison Chart)

Basis
Bin Card
Store Ledger
Introduction
Quantitative recording of the movement of stock
Both quantitative and qualitative recording of movement of stock
Known As
Stock Card
Subsidiary Ledger
Recording Of
Quantity of stock received, issued and remained
quantity (volume) and monetary value of stock received, issued and remained 
Prepared By
Store Department
Accounting Department
Knowledge/Skills
Not Required
Required
Nature Of Record
Rough
Up-to-date
Interdepartmental Transaction
Not recorded
Recorded
Entries Made
Before Transaction
After Transaction
Individual Transaction
Yes 
No
Placed/Kept
In the store
In accounting department

Distinction Between Bin Card And Store Ledger In Short

- Bin card is a quantitative recording of the movement of materials. But store ledger records both quantity and values of materials.
- Bin card is a rough record of materials movement. On the other hand, store ledger is a detail accounting record.
- Bin card records individual transactions. In contrast, store ledger records summarized transactions.
- Bin card is prepared by the storekeeper. Store ledger is prepared by the costing department.
- Bin card avoids interdepartmental transactions. But Store ledger records such transactions also.

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