Meaning of Financial Accounting Part II
2.2.2 Cost and performance accounting
Cost and performance accounting is part of business accounting and determines the company’s profits and losses . The main thing is to provide short-term information, whereby cost and performance accounting is part of internal accounting. It focuses primarily on expenses and income that arise in normal day-to-day business. It is subject to few regulations by the law, which makes a big difference to financial accounting.
The cost and performance accounting is aimed at the decision-makers in the company and has a supporting function in the calculation of costs and in the evaluation of cost units, in the overview of the existing inventories and investments and in the examination of the efficiency of the company. In addition, the plan, target and actual data are compared within the framework of cost and performance accounting. Operational performance processes are not included in cost and performance accounting, which is why it is less precise than financial accounting.
2.2.3 Business statistics
According to Theinternetfaqs, business statistics deals with numbers: It is about the preparation and evaluation of numbers from bookkeeping and from cost and performance accounting. The aim of the activities is to be able to accurately assess the business activities and to achieve a certain monitoring function . Figures and data on procurement, inventory and sales, personnel and costs are important for statistics. Today’s figures are compared with earlier figures, or your own current figures are compared with those of other companies in the same industry. Business statistics are the basis for a company’s planning calculations.
2.2.4 Planning calculation
The planning calculation forms the basis for all operational decisions and prepares them. Targets are set for the coming economic periods and this results in a preliminary calculation for the company. For this purpose, data from financial accounting, statistics and the general structural development of the economy are processed. The developments of the competition also play a role in the planning calculation. The planning calculation and its results are summarized in the budget and can be seen in detail in the personnel, procurement, investment and finance plan.
2.3 Difference between financial accounting and cost accounting
Financial accounting deals with the expenses and income of a company and shows the entire economic situation of the same. Here, for example, an impending bankruptcy can also be seen. Cost accounting, on the other hand, deals with the proceeds and the costs incurred , it is about the effectiveness of investments and when these investments can prove to be economical.
However, both areas cannot be separate from each other, because only they both together provide a basis for controlling the company in the sense of business administration (BWL).
Financial accounting is mandatory by law, as it forms the basis for the calculations by the tax office and for other authorities and institutions. Cost accounting, on the other hand, is not subject to any legal obligation, but is of great importance internally for the company.
2.4 Legal bases of financial accounting
Financial accounting is required by law. The Commercial Code provides precise regulations for financial accounting, and tax law also knows the associated paragraphs. In addition to these two laws, regulations must be observed that are specific to the legal form: GmbH law, stock corporation law and cooperative law have special requirements for financial accounting that must be strictly adhered to.
According to the Commercial Code, every merchant is obliged to keep books, as can be seen in Section 238 (1) of the HGB . Tax law derives an accounting obligation from the paragraph, which is also explained in Section 140 of the Tax Code . The individual cases mentioned in Section 141 of the Tax Code are excluded from the rules there. Those who are required to keep accounts are listed there who would not have to keep accounts without the amounts specified here:
- Companies with sales of 600,000 euros or more per calendar year
- Manager of agricultural and forestry areas with a value of over 25,000 euros
- Commercial company with a profit of over 60,000 euros in the financial year
- Agricultural and forestry companies with a profit of more than 60,000 euros per year
Freelancers are not required to keep accounts and can determine their profit using the income-surplus calculation .
3. Activities in financial accounting
Financial accounting is one of the most important areas of responsibility in the company and includes numerous activities with different focuses. Among other things, it is about the determination of the prime costs, about controlling within the company and about statistical evaluations.
3.1 The most important tasks in financial accounting
Financial accounting as the most important focus within corporate accounting fulfills numerous tasks. For example, it is about the determination of stocks and changes within a stock. Closely related to this is the profit and loss account. It is also about the provision of numbers, on the basis of which prices can be calculated. The financial bookkeeping prepares statistics and evaluations and takes on the function of internal control. In addition, provisions are determined and the advance VAT return is created. In the following we break down the individual tasks of financial accounting in detail: