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Difference Between Marginal and Fixed Accounting

Difference Between Marginal and Fixed Accounting

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classof1, accounting homework help, accounting assignment help, accounting help, online accounting help, accounting study help, help with accounting, marginal accounting, fixed accounting, fixed costs, calculations, detailed transactions




classof1, accounting homework help, accounting assignment help, accounting help, online accounting help, accounting study help, help with accounting, marginal accounting, fixed accounting, fixed costs, calculations, detailed transactions




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Published by: ClassOf1.com on Mar 12, 2014
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03/12/2014

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ccounting
 
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The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for submitting the same in lieu of their academic submissions for grades.
Subject: Accounting
 
Difference Between Marginal and Fixed ccounting
 Marginal Accounting:
 A decision making process where marginal costs are used as the basis for choosing  which product to produce or which process to use is called marginal accounting. It is also called incremental costing.
 Fixed Accounting:
It is a process of accounting by which financial statements are prepared for decision makers like; suppliers, bankers, owners, stakeholders etc. In short it is the method of summarizing
organization’s
 data and presenting it in a form of reports for the benefit of people outside the organization. It produces general purpose financial statements, produces information used by the management for decision making, planning, performance evaluation and producing statements for meeting regulatory requirements. The prime difference between managerial and financial accounting is that managerial accounting information is focuses at helping managers within the organization to make decisions, while financial accounting focuses at providing information to parties outside the organization. Both Marginal accounting and Financial accounting used for providing information to the interested parties, where Financial accounting is independent branch of accounting, while Marginal accounting is a part of cost accounting.
 
 *
The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for submitting the same in lieu of their academic submissions for grades.
Subject: Accounting
 
 Detailed Transactions
In financial accounting the financial transactions are recorded, analyzed and summarized. The transactions are summarized as assets, incomes, liabilities and expenses, where as in marginal accounting we have to analyze them more for better cost decisions. We further divide our expenses into variable and fixed cost. The difference between fixed and contribution cost will be net profit. In financial accounting, net profit is calculated on the basis of long run. Revenue expenses are taken into consideration for calculating net profit.
 Net profit = Total revenue - Revenue expenditures
 All capital expenditures are also fixed cost however they are not deducted in income statement.
 Fixed costs
Marginal accounting is vital for cost volume profit analysis. Fixed cost will be fixed at every level of output; however variable cost will change due to changing in output. Hence, contribution is calculated at different level of output.
Calculations
Financial accounting gives us the income statement and balance sheet. Further decisions are taken by the interested parties. Marginal cost calculation lets you arrive at the price to purchase/produce one more items. It is defined as the change in cost divided by the change in unit of production. Once this is calculated, if the result is lower than the current price of the item, it leads to cutting prices to sell more.

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