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The major differences between economic cost and accounting cost are as follows −Economic costIt has monetary value of all resources.It refers to opportunity cost.It focuses more on implicit cost.It is relevant for decision making.It is forward looking.It is not objectively verified.It estimates the cost of alternatives sacrificed.Accounting costIt is based on explicit costs.It is present in the financial statements.It is backward looking.It is objectively verifiable.It tells about financial position of a firm.It is used to make tax payments.
The major differences between accounting profit and economic profit are as follows −Accounting profitIt gives true financial health of a company.It tells about profitability of the company.No special terms are needed here.It is more practical than economic profit.It’s a short term phenomenon.It is determined by GAAP.It is used for income tax and financial performance.It has single entity/accounting period view.The formula to calculate accounting profit is as follows &minus accounting profit = total revenue – expensesEconomic profitIt doesn’t give true financial health of a company.It tells about effective allocation of resources.It includes special terms such as residual value, inflation level changes ... Read More
The major differences between domestic finance and international finance are as follows −Domestic financeThe currency exposure has no impact.It is exposed to same economic and political environments.It is exposed to same tax laws and regulations.Stakeholders are of same beliefs, languages etc.Knowledge of foreign exchange derivatives is not required.Challenges are limited.Maintenance of separate books are not required.International financeThe currency exposure has impact.It is exposed to different economic and political environments.It is exposed to different tax laws and regulations.Stakeholders are of different beliefs, languages etc.Knowledge of foreign exchange derivatives are required.Challenges are limitless.Maintenance of separate books are required as per GAAP/AS.Read More
The major differences between horizontal analysis and vertical analysis of financial statements are as follows −Horizontal analysisIts main aim is to compare line items to calculate the changeover the time.In this, information is compared line by line to make decisions.It is useful when financial results of current/targeted years are compared with previous financial years.It states growth/decline of an item.It tells about changes in items over the time.It is used in intra comparison.It is used in income statements, balance sheets, retained earnings statements.It includes long term planning.Vertical analysisIts main purpose is to compare change in percentages.In this, each line item is ... Read More
The major differences between comparative analysis and common size analysis are as follows −Comparative analysisIt shows previous financial results side by side along with its change in amount/percentage.It compares current year results with its base year.It’s a horizontal analysis.The results are expressed in both percentages and pictorial form.Both inter and intra firm can be compared.It helps in internal decision making.It is useful to compare results with its previous financial years.Relative importance of individual figures can’t be shown in statement with comparative analysis.Common Size analysisIt shows results regarding same year in the form of percentages.It compares figures of same year.It’s a ... Read More
The major differences between trend analysis and comparative analysis are as follows −Trend analysisIt is designed to look for trends in business performances.It is analysed in horizontal methods.It adopts line by line method.It can be interpreted in absolute terms, as a percentages and in graphical forms.It is useful to compare its results with previous years.Comparative analysisIt is designed to compare changes from time to time.It is analysed in horizontal or vertical methods.It focusses on comparison with the help of financial information.It uses ratio calculation.It can be useful in comparing its results with previous financial years and also can be compared ... Read More
The major differences between tangible assets and intangible assets are as follows −Tangible assetsThey have physical existence.They get depreciated.Liquidation is easier as compared to intangible assets.They can be determined and evaluated easily.They increase the value of the company.They can be accepted as collateral.They can be effected by natural calamities and by others means.Land, vehicle, machinery, furniture etc. are some of the examples of tangible assets.Intangible assetsThey don’t have physical existence.They get amortised.Liquidation is not easy as compared to tangible assets.Determination and evaluation is difficult.They increase the potential revenue.They can’t be accepted as collateral.They can be effected by business failure only.Blueprints, ... Read More
The major differences between cost inflation and deflation are as follows −InflationIt increases aggregate price level.If inflation is caused by demand it is called Demand pull inflation.If inflation is caused by supply it is called cost push inflation.It is beneficial to economy.It reduces purchasing power of money.It results in unequal distribution of money.DeflationIt decreases in aggregate price level.If deflation is caused by reduction in money supply, then it is called money supply deflation.If deflation is caused by credit factors, then it is called as credit deflation.It is not good for economy.It increases purchasing power of money.It reduces investments, increase in ... Read More
The major differences between accounting depreciation and tax depreciation are as follows −Accounting depreciationIt is prepared for accounting purpose.It is based on International Accounting Standards Board (IASB) and accounting principles.One can choose any depreciation method.It is more accurate as compared to tax depreciation.Tax depreciationIt is prepared for income tax purpose.It is based on Internal Revenue service (IRS) regulations.It uses accelerated depreciation method.It is less accurate as compared to accounting depreciation.
The major differences between financial accounting and management accounting are as follows −Financial accountingIt provides financial information to parties by preparing financial statements of a company.It is compulsory and covers only information related to monetary.Its main objective is to prepare financial information.These have specified formats to prepare.Prepared based on GAAP and is generally prepared once in a year.These are published and audited by statutory auditorsIt has historical perspective.Shareholders, lenders etc. use financial accounting.Management accountingIt provides information which helps in making policies, plans and strategies for effective business.It is not compulsory and covers both information related to both monetary and non- ... Read More