Q) How does accounting relates to human resources?

ANS) Human resource accounting involves the tracking of all costs related to employees in a
separate report. These costs include employee compensation, payroll taxes, benefits, training,
and recruiting. Such an accounting system can be used to determine where human resources
costs are especially heavy or light in an organization. This information can be used to redirect
employees toward those activities to which they can bring the most value. Conversely, the
report can be used to identify those areas in which employee costs are too high, which may lead
to a reduction in force or a reallocation of staff away from those areas.

A more comprehensive human resource accounting system goes beyond the simple tracking of
employee-related costs, and addresses the following two additional areas:

 Budgeting. An organization's annual budget includes a human resources component, in

which is concentrated all employee costs being incurred from across the organization. By
concentrating cost information by its nature, management can more clearly see the total impact
of human resource costs on the entity.

 Employee valuation. Rather than looking at employees as costs, the system is redirected
toward viewing them as assets. This can involve the assignment of values to employees based
on their experience, education, innovativeness, leadership, and so forth. This can be a difficult
area in which to achieve a verifiable level of quantification, and so may have limited value from
a management perspective.

From an accounting perspective, the expense-based view of human resources is quite easy -
employee costs from the various departments are simply aggregated into a report. The employee
valuation approach is not a tenable concept for the accountant, since this is an internally-
generated intangible asset, and so cannot be recorded in the accounting system.

Q) Difference between cost accounting and management accounting?

The key difference between Cost Accounting vs Management accounting

is that Cost accounting is gathering and analyzing the information
related to cost which provides only the quantitative information to the
users of the reports whereas Management Accounting is the preparation
of the financial as well as non-financial information i.e., it involves both
quantitative and qualitative information.

Management accounting includes a lot of aspects of business such as decision

making, strategizing, planning, performance management, risk management,

etc. Cost accounting, on the other hand, only revolves around cost

computation, cost control, and overall cost reduction of business.

In simple terms, cost accounting is one of the sub-sets of management

accounting. As a result, the scope and reach of management accounting are

much broader and pervasive than cost accounting. So, we can say that

management accounting can provide a helicopter view of the business by

looking at each aspect qualitatively and quantitatively. Cost accounting only

gives a pixel view of the cost of each product, service, or process.

Q) what is income statement ? describe the components of income statement?

The Income Statement is one of a company’s core financial statements that

shows their profit and loss over a period of time.  The profit or loss is
determined by taking all revenues and subtracting all expenses from both
operating and non-operating activities.

Income Statement Components

Revenue
Revenue is the money an entity receives from the sale of goods or services. Other terms
frequently used for revenue are sales, net sales, or sale revenue. It is also referred to as
the “top line” because revenues are reported at the top of the income statement.
Cost of Goods Sold
Cost of goods sold are the direct costs of producing the goods being offered by the entity.
This would include the materials, labor, and other resources required for production.
Gross Profit
Gross profit is the difference between the revenue received for the product less the cost
of goods sold.
Operating Expenses
Operating expenses are the amount an entity expends to maintain and operate the
general business. Operating expenses include research and development, marketing,
general and administrative, amortization of intangible assets (i.e. patents, good will,
etc.), etc.
In addition, when an entity purchases a capital asset, such as a building or equipment,
they expense a portion of the asset over a number of years; this is called depreciation.
Depreciation expense is an accounting expense that is deducted from net income.
Operating Income
Operating income is equal to revenues minus cost of goods sold and operating expenses.
In other words, it measures the profits or losses of the day to day operations of the
business.  Another name for Operating Income is Earnings Before Interest and Taxes
(EBIT).
Other Income/Expenses
To obtain net income, further adjustments must be made to account for interest income
and expense, income tax expenses, and other extraordinary and miscellaneous  items.
Profits
Revenues minus all expenses equals net income (profits or losses). Profits are also
referred to as net income or the “bottom line” because profits are reported at the bottom
of the income statement. Some analysts call these “accounting profits” because they
include non-cash accounting entries such as depreciation and amortization.

Q) Write formulas of the following.

ANS) Gross Profit : Revenue – Cost of Goods Sold.

2) Operating profit= Revenues – Direct Costs – Indirect Costs

3) Net Profit = Total Revenue - Total Expenses