Tag: Between

  • Difference Between an Intrapreneur and Entrepreneur

    Difference Between an Intrapreneur and Entrepreneur

    Intrapreneur and Entrepreneur: An entrepreneur takes the substantial risk of being the owner and operator of a business with expectations of financial profit and other rewards that the business may generate. The essential distinction between an Intrapreneur and Entrepreneur [In Hindi]; Intrapreneurs share similar characteristics as entrepreneurs, for example, conviction, enthusiasm, and understanding. Unexpectedly, an intrapreneur is an individual utilized by an association for compensation. Which depends on the monetary accomplishment of the unit he is liable for.

    Learn, Understanding, What is the Difference Between an Intrapreneur and Entrepreneur?

    As the intrapreneur keeps on communicating his thoughts overwhelmingly. It will uncover the hole between the way of thinking of the association and the representative. On the off chance that the association upholds him in seeking after his thoughts, he succeeds. If not, he is probably going to leave the association and set up his own business.

    Entrepreneurship includes advancement, the capacity to face the challenge, and inventiveness. An entrepreneur will have the option to take a gander at things in novel manners. He will have the ability to face the determined challenge and to acknowledge disappointment as a learning point. An intrapreneur thinks like an entrepreneur paying special mind to circumstances, which benefit the association.

    Intrapreneurship is a novel method of causing associations more productive where innovative representatives to engage entrepreneurial contemplations. It is in light of a legitimate concern for an association to support intrapreneurs. Intrapreneurship is a critical technique for organizations to rethink themselves and improve execution.

    In an ongoing report.

    Scientists contrasted the components related to entrepreneurial and intrapreneurial movement. The investigation found that among the 32,000 subjects who partake in it, five percent occupied with the underlying phases of a business fire up, either all alone or inside an association.

    The examination additionally found that human resources, for example, training and experience are interfacing more with entrepreneurship than with intrapreneurship. Another perception was that intrapreneurial new companies were slanted to focus more on business-to-business items while entrepreneurial new businesses were slanted towards buyer deals.

    Another significant factor that prompted the decision among entrepreneurship and intrapreneurship was age. The investigation found that individuals who dispatched their own organizations were in their 30s and 40s. Individuals from more established and more youthful age bunches were hazarding loath or felt they have no chances, which makes them the ideal candidates if an association is watching out for workers with groundbreaking thoughts that can seek after.

    Entrepreneurship requests to individuals who have common qualities that discover new businesses exciting their advantage. Intrapreneurs have all the earmarks of being the individuals who by and large might not want to get trapped in new companies however are enticed to do as such for reasons unknown. Supervisors would do well to take representatives who don’t seem entrepreneurial however can end up being acceptable intrapreneurial decisions.

    The distinction in Definition of Entrepreneur and Intrapreneur:

    As both entrepreneur and intrapreneur share comparable characteristics like conviction, inventiveness, energy, and knowledge, the two uses reciprocally. In any case, the two are unique, as an entrepreneur is an individual who takes a lot of danger to possess and work the business, expecting to acquire returns and rewards, from that business. He is the main individual who imagines new chances, items, strategies, and business lines and arranges all the exercises to make them genuine.

    Actually, an intrapreneur is a worker of the association who is pay compensation as indicated by the achievement of the specialty unit, for which he/she is employing or capable.

    The essential contrast between an entrepreneur and intrapreneur is that the previous alludes to an individual who goes into business with a novel thought or idea, the last speak to a representative who advances development inside the restrictions of the association. In this article passage, we are furnishing you with some other significant purposes of qualification between the two.

    Definition of Entrepreneur:

    An entrepreneur is a person who imagines beginning another endeavor, take a wide range of dangers, not exclusively to place the item or administration into the real world yet additionally to make it an incredibly demanding one. He is somebody who:

    • Starts and enhances another idea,
    • Perceives and uses the chance,
    • Organizes and facilitates assets, for example, man, material, machine, and capital,
    • Take reasonable activities,
    • Faces dangers and vulnerabilities,
    • Sets up a new business,
    • Enhances the item or administration,
    • Takes choices to make the item or administration a productive one,
    • Is answerable for the benefits or misfortunes of the organization.

    Entrepreneurs are consistently the market chief paying little mind to the number of contenders since they carry a moderately new idea to the market and present change.

    Definition of Intrapreneur:

    An intrapreneur is only an entrepreneur inside the limits of the association. An intrapreneur is a representative of a huge association, who has the authority of starting imagination and advancement in the organization’s items, administrations, and activities, upgrading the cycles, work processes, and frameworks to change them into a fruitful endeavor of the undertaking.

    The intrapreneurs have confidence in change and don’t fear disappointment, they find groundbreaking thoughts, search for such open doors that can profit the entire association faces challenges, elevates development to improve the exhibition and benefit, assets are giving by the association. The occupation of an intrapreneur is very testing; henceforth they are acknowledging and awards by the association appropriately.

    From the most recent couple of years, it has become a pattern that enormous companies select intrapreneurs inside the association, to bring operational greatness and increase the upper hand.

    Primary key contrasts among Entrepreneur and Intrapreneur:

    An entrepreneur faces a significant challenge in being the proprietor and administrator of a business with desires for the budgetary benefit and different prizes that the business may create. In actuality, an intrapreneur an individual utilizes an association for compensation. Which depends on the monetary achievement of the unit he is liable for.

    Intrapreneurs share similar qualities as entrepreneurs, for example, conviction, enthusiasm, and understanding. As the intrapreneur keeps on communicating his thoughts energetically. It will uncover the hole between the way of thinking of the association and the worker. If the association underpins him in seeking after his thoughts, he succeeds. If not, he is probably going to leave the association and set up his own business.

    Central matters;

    The significant distinctive focuses among entrepreneur and intrapreneur, give in the accompanying focuses:

    • An entrepreneur characterizes as an individual who builds up another business with a creative thought or idea. A worker of the association who is approving to attempt developments in item, administration, measure, framework, and so on knows as Intrapreneur.
    • The entrepreneur is instinctive, though an intrapreneur is remedial.
    • An entrepreneur utilizes his assets, for example, man, machine, cash, and so on while on account of an intrapreneur the assets are promptly accessible, as they are giving to him by the organization.
    • An entrepreneur raises capital himself. Alternately, an intrapreneur doesn’t have to raise finances himself; rather it gives by the organization.
    • An entrepreneur works in a recently-settled organization. Then again, an intrapreneur is a piece of a current association.
    • An entrepreneur is his chief, so he is free to make choices. Rather than intrapreneur, who works for the association, he can’t make free choices.
    • This is one of the notable highlights of an entrepreneur; he is fit for bearing the dangers and vulnerabilities of the business. Dissimilar to intrapreneur, in which the organization bears all the dangers.
    • The entrepreneur endeavors to enter the market effectively and make a spot thusly. As opposed to Intrapreneur, who works for association-wide change to bring development, innovativeness, and profitability.
    What is the Difference Between an Intrapreneur and Entrepreneur
    What is the Difference Between an Intrapreneur and Entrepreneur?
  • Public and Private Finance: Differences and Similarities

    Public and Private Finance: Differences and Similarities

    What does Public and Private Finance mean? Public and Private Finance: Differences, Similarities, and Dissimilarities; what their meaning? Public finance is the finance sector that deals with the allocation of resources to meet the set budgets for government entities. Private Finance can classify into two categories the public or personal finance and business finance. Personal finance deals with the process of optimizing finances by individuals such as people, families, and single consumers.

    The Concept of Public and Private Finance; explain into Differences, Similarities, and Dissimilarities.

    Public finance has several branches; public revenue, public expenditure, public debt, budget policy, and fiscal policy. This branch of economics is responsible for the scrutiny of the meaning and effects of financial policies implemented by the government. This sector examines the effects and results of the application of taxation and the expenditures of all economic agents and the overall economy. Richard Musgrave, a renowned Economics professor, terms Public Finance as a complex of problems that are centered around the income and expenditure processes of the government.

    Personal Finance deals with the process of optimizing finances by individuals such as people, families, and single consumers. A great example is an individual financing his/her car by the mortgage. Personal finance involves financial planning at the lowest individual level. It includes savings accounts, insurance policies, consumer loans, stock market investments, retirement plans, and credit cards.

    Business Finance involves the process of optimizing finances by business organizations. It involves asset acquisition and proper allocation of funds in a way that maximizes the achievement of set goals. Businesses can require finances on either of the three levels; short, medium, or long term.

    Differences between Public and Private Finance:

    The following differences are explained into two sections; A) Basic, and B) Advanced.

    A. Basic differences part one are;

    About the differences between private and public finance.

    • The pattern and volume of expenditure of an individual are influenced by his total resources income and wealth but in the case of government, expenditure determines income. Moreover, government expenditures de­termine people’s income. If the government spends money on road construc­tion, some employment is automatically generated.
    • Private individuals or firms are mainly concerned with private con­sumption or profits. The government aims at promoting the welfare of society rather than that of the individual. The individual (or a firm) is mainly concerned with his (its) present gains and prospects, not with that of the distant future. The government has to serve society generation after generation.
    • Private firms derive income by selling goods and they pay to factors of production according to the quantity or quality purchased. The services of governments are usually made available to individuals quite irrespective of the cost and often at rates that do not cover full costs.
    • A public authority can vary the amount of its income and expenditure within limits, of course, but more easily than an individual. An individual cannot easily double his income or halve his expenses even if he would be better off that way. But this is not so difficult in the case of Governments.
    A. Basic differences part two are;

    About the differences between private and public finance.

    • A public authority usually does not discount the future at as high a rate as an individual. The reason is obvious. The life of a man is counted in years and his foresight is limned. A-State is supposed to live forever. Hence, future satisfactions do not appear so small against present utilities to a State as they do to an individual. He always prefers a bird in hand to two in the bush even though the two in the bush may be fairly certain tomorrow.
    • A wise man is he who, after meeting his needs, saves something to lay by. Not so with a State. A State should not ordinarily try to hoard but should repay to the people in services all that it receives in taxes. A heavily surplus budget is for this reason as bad as, and perhaps even worse than, a heavily deficit one. The deficit budget may propose to incur the deficit for the promotion of mass welfare, while the surplus budget is only an extra burden on the tax-payer.
    • There is no fixed period over which an individual balances his budget. State budgets are -generally made for one year. But the income and expenditure of an individual are continuous and cover the whole period of his life.
    • Individual finance is kept a secret, whereas State finance is made public. The budget is published and every citizen is welcome to scrutinize it and comment on it. An individual will not let anybody have a peep into his financial position.
    B. Advanced differences;

    The following differences below are;

    Borrowing:

    The government can borrow from itself, it can simply go back to the people to ask for loans in whichever financial asset e.g. bonds when shortages arise. However, an individual can’t borrow from itself.

    Objective:

    The public sector’s main objective is to create social benefits in the economy. The private industry seeks to maximize personal or profit benefits.

    Currency ownership:

    The government is in charge of all aspects related to currency. This involves the creation, distribution, and monitoring. No one in the private sector allows to create currency, this is illegal and most countries classify it as a capital offense.

    Present or future Income:

    The public sector is more involved with future planning and making long-term decisions. The government makes decisions that will bear fruits in the long-term even ten years. These investments could include the building of schools, hospitals, and infrastructure. The private industry makes financial decisions on projects with a shorter return waiting time.

    Income and Expenditure Adjustment:

    The government adjusts the income according to the expenditure budget. The private sector including individuals and private businesses adjust their expenditure according to the income or future estimates. The government first creates an outline for the expenditure then devices means of acquiring the monetary budget needed. Private finance involves cutting your coat according to your cloth.

    Coercion to getting Revenue:

    The government can use force to get revenue from individuals. This could involve the use of force to get taxes. The private sector, however, doesn’t have this authority.

    Surplus Budget Concept:

    Excess income or surplus budgets is a great virtue in the private sector, this is however not the case in public finance. The government is expected to only raise what is needed for a fiscal year. Of what use would it be to have surplus budgets? It would be much easier to offer tax reliefs to the tax-payers to offset the surplus.

    Ability to Make Huge and Deliberate Changes:

    The public finance sector can make huge decisions on income amount without any consequences. For example, it can effectively and deliberately increase or decrease the income amount instantly. Businesses and individuals can’t make these decisions and implement them immediately.

    Similarities between Public and Private Finance:

    While the individual is concerned with the utilization of labor and capital at his disposal, to satisfy some of his wants, the state is concerned with the utilization of the labor and capital and other resources to satisfy social wants. It will observe that both private and public finance have broadly, the same objective, namely the satisfaction of human wants.

    However, while private finance em­phasizes individual interests public finance attempts to promote so­cial welfare. From this, it may though that public finance is only an extension of private finance and that the rules and regulations which apply to private finance will also apply to public fi­nance.

    The following similarities below are;

    Borrowing:

    Borrowing is a common element both in private and public fi­nance. Just as an individual borrows from different sources when current incomes are insufficient to meet the current expenditure, the public authority also resorts to borrowing, when its revenue fall short of aggregate expenditure.

    Problems of Adjustment of Income and Expenditure:

    Both public and private finance always face the problem of the adjust­ment of income and expenditure. Hence the problem of choice is common in both types of finance. Both kinds of finance have income and expenditure. Both try to balance their income and expenditure.

    Rationality:

    Private and public finance are based on rational behavior. The resources at the disposal of private individuals and public authority are limited. Therefore in both cases, maximum care is taken to en­sure better utilization of scarce resources. A rational individual tries to maximize personal benefits from his expenditure. Likewise, a rational government seeks to maximize social benefits from public expenditure.

    The scarcity of Resources:

    Both have limited resources at their disposal. Both public and private individuals are required to match their income and expenditures in such a way that both make the optimum use of scarce resources.

    Loans are Repayable:

    Both private and public loans are required to repay. An individual borrows money from various sources to meet personal requirements. But that too cannot unlimited. He has to repay his loans. Like individuals, the government cannot live beyond its means. It can temporarily postpone repayment of loans, but it is obligatory to repay the loans. Thus, public finance may regard as an extension of private finance. This, however, is not true.

    Public and Private Finance Differences Similarities and Dissimilarities
    Public and Private Finance: Differences, Similarities, and Dissimilarities, #Pixabay.

    Dissimilarities between Public and Private Finance:

    One can notice fundamental dissimilarities between public and private finance.

    The important differences are:

    Public Budget is not Necessarily Balanced:

    An individual tries to maintain a balanced budget and maintenance of a surplus budget is a virtue. Instead of a balanced or surplus budget, it is desirable to have a deficit budget of a government to increase the country’s productive power. In other words, a surplus budget may not stimulate economic activities. On the contrary, a deficit budget often makes to finance economic development.

    The scope of Study:

    Public finance studies the complex problems that center around the revenue – expenditure process of government. Private finance, on the other hand, confines to the study of those aspects of the economy that arise in the course of operation of private households in the sphere of financial transactions and activities. Hence in terms of scope of study private finance has a limited sphere of operation.

    Compulsory Character:

    There are certain items of expenditure that the state can neither avoid nor postpone. Irrespective of the availability of resources, this type of expenditure should in­cur.

    According to Prof. Findlay Sierras,

    “Another characteristic of public expenditure is its compulsory char­acter.”

    The expenditure on defense, civil administrations, etc. is compulsory. Likewise, the state can compel people to pur­chase and consume a particular variety of cloth, wheat, or other com­modities at a price fixed by the state.

    Nature of Resources:

    There is a difference between private and public authorities as re­gards the nature of resources. While the individual has only limited resources at his disposal, the public authorities can even draw upon the entire wealth of the community, by raising a force, if necessary.

    Tax payment is a personal responsibility of the taxpayer. Nobody can refuse to pay taxes if it is imposing on him. Besides tax rev­enue, the public authorities can borrow funds from the general public and if needed, from outside the country.

    The government can even resort to deficit financing, as and when the financial situation worsens. As compared to this, individuals and business houses have only a limited source of resources.

    Coercive Authority of the Government:

    An individual cannot raise coercive methods to raise his income. But the government can use force to collect the necessary revenue. Since the public authority possesses coercive power, it can raise the rate of taxes, add new taxes to the existing system, and force taxpayers to pay taxes promptly. Moreover, during the financial crisis, the government can intro­duce, the compulsory deposit of funds, using the coercive authority of the state.

  • Difference between Traditional and Managerial Economics

    Difference between Traditional and Managerial Economics

    The primary difference between Traditional Economics and Managerial Economics; First, the Traditional economy is an original economic system in which traditions, customs, and beliefs help shape the goods and services the economy produces and the rules and manner of their distribution. Countries that use this type of economic system are often rural and farm-based. The concept of the study explains – What is traditional economics? Meaning, and What is Managerial economics? and their difference.

    Understanding and Learn, Explain the Difference between Traditional Economics and Managerial Economics!

    Also known as a subsistence economy, a traditional economy defines by bartering and trading. A Little surplus produces, and if any excess goods are made, they are typically given to a ruling authority or landowner.

    After, Managerial economics is the “application of the economic concepts and economic analysis to the problems of formulating rational managerial decisions”. It sometimes refers to as business economics and is a branch of economics that applies microeconomic analysis to decision methods of businesses or other management units.

    What is traditional economics? Meaning.

    Traditional economics refers to the more primitive principles of modern economics, which are commonly using in undeveloped countries, who have not yet embraced technical and globalization changes in the study of economics over the years. Traditional economics relies on the use of old cultures, trends, and customs in allocating rare resources to gain profit.

    A traditional economy will definitely rely on the traditions of heritage and how the previous generations have made their production activities, which will create the basis for the production of goods. The main production activities in the traditional economy include farming, livestock activities, and hunting. In countries with such traditional economic systems, Papua New Guinea, South America, parts of Africa, and the rural areas of Asia are including.

    What is managerial economics? Meaning.

    Managerial economics refers to the branch of economics, which derives from the subject matter of microeconomics, which considers houses and firms in the economy, and macroeconomics related to employment rates, interest rates, inflation rates, and other macroeconomic variables from the country are related to the complete completion.

    Managerial economics uses mathematics, statistics, management theory, economic data, and modeling techniques to help business managers manage their operations with maximum efficiency. They help managers make the right decisions in the allocation of rare resources such as land, labor, capital to achieve high profitability while reducing costs. Managerial economics helps managers decide which products to produce, how much to produce, what prices will determine, and what channels to use in sales and distribution.

    What is the Difference between Traditional Economics and Managerial Economics?

    The upcoming discussion will help you to differentiate between traditional and managerial economics.

    The difference in Traditional Economics:
    • Traditional Economics has both Micro and Macro aspects.
    • This is both positive (existing certain) and Normative Science.
    • This deals with Theoretical aspects only.
    • Here, problems are analyzing both from a Micro and Macro point of view.
    • It studies human behavior based on certain assumptions, but these assumptions do not hold good in Managerial Economics.
    • Here, we study only the economic aspects of the problems.
    • Here, we study principles underlying rent, wages, interest, and profits.
    • Traditional Economics scope is wide and it covers various areas.
    • Here, the efficiency of the firm is not studying.
    The difference in Managerial Economics:
    • It is essentially Micro in character.
    • This is essentially Normative (setting standard) in nature.
    • While it deals with Practical aspects.
    • It studies the activities of an individual firm or unit.
    • Managerial economics deals mainly with Practical problems.
    • Here, both economic and non-economic aspects of the problems are studying.
    • Here, we study mainly the principles of profit only.
    • While the scope of Managerial Economics is limited and its scope is not so wide as that of Traditional Economics.
    • Here, the most important task is to study how to improve the efficiency of the firm.

    Another Main difference between Traditional and Managerial in without table:

    Managerial Economics has been describing as economics apply to decision-making. It may view as a special branch of Economics. However, the main points of differences are the following:

    • Traditional Economics has both micro and macro aspects whereas Managerial Economics is essentially micro in character.
    • Economics is both positive and normative science but Managerial Economics is essentially normative in nature.
    • Economics deals mainly with the theoretical aspect only whereas Managerial Economics deals with the practical aspect.
    • Managerial Economics studies the activities of an individual firm or unit. Its analysis of problems is micro in nature, whereas Economics analyzes problems both from the micro and macro point of view.
    • Economics studies human behavior based on certain assumptions. But, these assumptions sometimes do not hold good in Managerial Economics as it concerns mainly with practical problems.
    • Under Economics we study only the economic aspect of the problems but under Managerial Economics we have to study. Both the economic and non-economic aspects of the problems.
    • Economics studies principles underlying rent, wages, interest, and profits. But in Managerial Economics we study mainly the principles of profit only.
    • Sound decision-making in Managerial Economics is considering to be the most important task for the improvement of the efficiency of the business firm. But in Economics it is not so.
    • The scope of Managerial Economics is limited and not so wide as that of Economics.

    Thus, it is obvious that Managerial Economics is very closely related to Economics. But, its scope is narrow as compared to Economics.

    Managerial Economics is also closely related to other subjects, viz., Statistics, Mathematics, and Accounting.

    A trained managerial economist integrates concepts and methods from all these disciplines bringing them to bear on the business problems of a firm.

    What is the difference between economics and managerial economics? Some Explanation.

    Both managerial economics and traditional economics include production, distribution, and consumption of goods and services, and are reflecting on the basic economic theory of using. The factors of production effectively for the production of both goods and services.

    The main difference between the branches of economics is that traditional economics is ancient. And, its development is done in undeveloped and less technologically advanced economies. While the result of managerial economics globalization and the development of economics involves making managerial decisions.

    Managerial economics uses sophisticated modeling systems and statistical data to make decisions regarding quantity, pricing and distribution channels, whereas, in traditional economics, the use of farming, hunting, and livestock activities uses by individuals to meet their daily consumption requirements. Includes.

    Difference between Traditional and Managerial Economics - ilearnlot
    Difference between Traditional and Managerial Economics, Image Credit to ilearnlot.com.
  • Ten Differences in Formal and Informal Education!

    Ten Differences in Formal and Informal Education!

    The Ten Content is the study of Ten Differences in Formal and Informal Education. We all think we know about education as being the one imparted in schools around the country.

    Explain Into Ten, Learn, Ten Differences in Formal and Informal Education! 

    This system of education, devised by the government and based upon a curriculum does called the formal system of education. However, in most countries, there is also an informal system of education that is different from school education and has nothing to do with the strict curriculum and other obligations found in formal education. Also Explain and learn, Ten Differences in Formal and Informal Education!

    What is Formal Education?

    Formal learning is education normally delivered by trained teachers in a systematic intentional way within a school, higher education, or university. It is one of three forms of learning as defined by the OECD, the others being informal learning, which typically takes place naturally as part of some other activity, and non-formal learning, which includes everything else, such as sports instruction provided by non-trained educators without a formal curriculum.

    The education that students get from trained teachers in classrooms through a structured curriculum is referred to as the formal system of education. Formal education does carefully thought out and provided by teachers who have a basic level of competency.

    This competency does standardize through formal training of teachers, to provide them with a certification that may be different in different countries. Formal education does imparted mainly in modern science, arts, and commerce streams with the science stream later getting divided into engineering and medical sciences.

    On the other hand, there is also the specialization of management and chartered accountancy that students can take up in higher studies after completing 16 years of formal education.

    What is Informal Education?

    Informal Education is a general term for education that can occur outside of a structured curriculum. Informal Education encompasses student interests within a curriculum in a regular classroom but does not limit to that setting. It works through conversation and the exploration and enlargement of experience. Sometimes there is a clear objective link to some broader plan, but not always. The goal is to provide learners with the tools they need to eventually reach more complex material.

    Informal education refers to a system of education that does not state-operated and sponsored. It does not lead to any certification and does not structured or classroom-based.

    For example, a father giving lessons to his son to make him proficient in a family-owned business is an example of informal education.

    Informal education is, therefore, a system or process that imparts skills or knowledge that is not formal or recognized by the state. This education does also not organized or structured as it is informal education. Learnings from incidents, radio, television, films, elders, peers, and parents get classified as informal education.

    Informal learning helps little ones to grow and adapt to the ways and traditions of society, and they learn to adapt to the environment in a much better manner.

    What is the difference between Formal and Informal Education?

    • Formal education stands recognized by the state as well as industry and people tend to get job opportunities based on the level of formal education they have achieved
    • Informal education does not recognized by the state but is important in the overall development of the individual. This system of learning is mostly incidental and verbal and not structured like formal education
    • The teachers in formal education receive formal training and are given the responsibility to teach based on their competency
    • Formal education takes place in classrooms while informal education takes place in life

    There is a specially designed curriculum in formal education while there is no curriculum and structure in informal education.

    The Difference between Formal Education and Informal Education:

     Keys

    Formal Education

    Informal Education

    Target GroupFull-time and Primary activity.Mainly adults, those interested, voluntary and open.
    Time ScaleProgramThe Part-time and Secondary activity of participants.
    RelevanceSeparate form life, In the special institution, In sole purpose buildings.Integrated with life, In the community, In all kinds of settings.
    Education to meet learners.Run by professionals, Excludes large parts of life.It is participatory, Includes large parts of life.
    CurriculumOne kind of education for all.Egalitarian belief in Equal Right.
    MethodsTeacher-centered, Mainly written.Learner-centered, Much is Oral.
    ObjectivesConformist.Promotes.
    IndependenceSet by teachers, Competitive.Set by learners and Controlled by Learners.
    OrientationFuture.Present.
    RelationshipHierarchical.The terminal at each stage, Validated by education Professional.
    ValidationThe terminal at each stage, Validated by an education Professional.Continuing validated by learners.
    Ten Differences in Formal and Informal Education - ilearnlot
  • Difference between Central and Commercial Banks

    Difference between Central and Commercial Banks

    The primary difference between Central and Commercial Banks; In any country’s financial sector, banks play a crucial role in the overall economic development, by mobilizing savings of individuals and entities. The Content of Difference between the Central Banks and Commercial Banks – Definition, Functions, Differences, Comparison, and Main Key Differences. They act as an intermediary between depositor and borrower. Besides lending money, banks provide various other value-added services, that help in the smooth functioning of the economy. Also, the Central bank, as the name suggests is the apex body, that regulates the entire banking system of the economy.

    Learn, Explain the Difference between Central and Commercial Banks! 

    The Central bank is not the same as a commercial bank, which is the financial institution that provides banking services to individuals and firms. There is a big difference between the central bank and commercial bank in India, in the sense that the former is the top financial institution in the country, whereas the latter is an agent of the Central Bank. Check out the article in which we have compiled some differences in tabular form.

    Definition of Central Banks:

    Central Bank is the supreme financial institution that regulates the banking and monetary system of the country. It is formed to bring monetary stability, issue notes, and maintain the value of a country’s currency in the international market. It administers the currency and credit system of the nation.

    In India, the Reserve Bank of India plays the role of a central bank, which came into existence, after passing an act in parliament in 1934. The bank is headquartered in Mumbai, Maharashtra.

    The following are the main functions of the Central Banks:
    • It has the power to control, direct, and supervise commercial banks. Also helps them at the time of need.
    • It employs various measures to control the credit operations of the commercial banks.
    • It’s the banker and advisor to the government of the country.
    • It acts as a manager of foreign exchange reserves.
    • It collects and publishes information relating to the banking and financial sector.
    • It’s authorized to issue currency notes except coins and notes of small magnitude.
    • It oversees the credit and monetary policy of the nation.

    Definition of Commercial Banks:

    The entities that provide banking and financial services to a large number of people are known as Commercial Banks. They act as a mediator between the borrowers and savers. Also, Commercial Banks receive deposits from the general public and lends it at high interest to individuals and organizations. In this way, the mobilization of savings takes place, and the economic cycle goes on smoothly.

    In earlier times, people used to deposit money in post offices for saving purposes, when the requirement of the banking system was felt. The people want an establishment where they can deposit their savings and withdraw them at the time of need. At present, there are more than 600 commercial banks in India, which include public sector banks, private sector banks, scheduled banks, non-scheduled banks, nationalized banks, etc.

    The essential functions of a Commercial Bank are:
    • It accepts deposits from the general public, firms, institutions, and organizations. Further, it gives the facility to withdraw money on demand. Banks pay interest on deposits at various rates on different deposits.
    • The lends money to the public, institutions, and organizations in the form of long term and short term loans for a particular period and charges interest on the amount lent. Moreover, it provides overdraft and cash credit facilities to the customer.
    • It performs agency functions like collections of bills of exchange and promissory notes, trading of shares and debentures, payment to third parties on standing instructions of the customer, etc.
    • It provides the facility of safekeeping of valuables like jewelry and documents.
    • Collects, transfers, and makes payment of funds on behalf of the customer.
    • It provides the facility of ATM card, Debit Card, Credit Card, Cheques, etc., to its account holders.

    Differences in Central Banks:

    • Work for the public welfare and economic development of a country. A central bank is governed by the government of a country.
    • Controls and regulates the entry banking system of a country.
    • Do not deal directly with the public. It issues guidelines to commercial banks for the economic development of the country.
    • Issues currency and control the supply of money in the Market.
    • Acts as a state-owned institution.
    • Act as a custodian of foreign exchange in the country.
    • Act as a banker to the Government.
    • Controls credit creations in the economy thus act as a clearinghouse of other banks.

    Differences in Commercial Banks:

    • Operates for Profit Motive. The Majority of Stake is held by the government as well as the private sector.
    • Operates under the direct control and supervision of the central bank. In India, all the commercial banks work under the guidelines issued by RBI.
    • Deals directly with the Public. It serves the financial requirement of the public by providing short and medium terms loans and depositing and securing money that can be drawn on demand.
    • Does not Issue currency, but only adds to the approval of the central bank.
    • Acts as a state or privately owned institution.
    • Perform foreign exchange business only on the approval of the central bank.
    • Acts as agents of the central bank.
    • Acts as a clearinghouse only as an agent of the central bank.

    Comparison of Central and Commercial Banks:

    The Basis for Comparison CENTRAL BANKS COMMERCIAL BANKS
    Meaning The bank which looks after the monetary system of the country is known as Central Bank. The establishment, which provides banking services to the public is known as Commercial Bank.
    What is it? It is a banker to the banks and the government of the country. It is the banker to the citizens of the nation.
    Governing Statute Reserve Bank of India Act, 1934. Banking Regulation Act, 1949.
    Ownership’s Public Public or Private
    Profit motive It does not exist for making a profit for its owners It exists for making a profit for its owners.
    Monetary Authority It is the supreme monetary authority with wide powers. No such authority.
    Objective Public welfare and economic development. Earning Profits
    Money supply Ultimate source of money supply in the economy. No such function is performed by it.
    Right to print and issue currency notes Yes No
    Deals with General Public Banks and Governments
    How many banks are there? Only one Many

    Main Key Differences between Central and Commercial Banks:

    Difference between Central and Commercial Banks
    Difference between Central and Commercial Banks

    The following are the differences between the central and commercial banks:

    • The bank, which monitors, regulates, and controls the financial system of the economy knows as Central Bank. The financial institution which receives deposits from people and advances them money is known as Commercial Bank.
    • Also, Central Bank is the banker to banks, government, and the financial institution, whereas Commercial Bank is the banker to the citizens.
    • The Central Bank is the supreme monetary authority of the country. As against this, the commercial bank does not have such authority and powers.
    • Central Bank of India i.e. the Reserve Bank of India is governed by RBI Act, 1934. Conversely, the Commercial Bank is regulating by the Banking Regulation Act, 1949.
    • The Central Bank is a publicly own institution while the Commercial Bank can be a publicly or privately owned institution.
    • The Central Bank does not exist for making a profit, whereas a commercial bank operates for making a profit for its owners.
    • Also, Central Bank is the fundamental source of money supply in the economy. While the commercial bank does not perform such a function on the contrary.
    • There is only one Central Bank in every country, but the Commercial Banks are many which serve the whole country.
    • The Central Bank does not deal with the general public, but Commercial Bank does.
    • The Central Bank has got the authority to print and issue the notes. Also, on the other hand, the commercial bank does not have such authority.
    • Bank main purpose of the Central Bank is a public welfare and economic development. In contrast Commercial Bank, which runs for-profit motive.

  • The Relationship between Central and Commercial Banks!

    The central bank and commercial banks have their distinct identities and functions. The central bank, through its function of the lender of the last resort, acts as an active agent of the government in implementing its monetary policies. In developed countries, the efficient carrying out of this function is easy. Also learned, Economic and Market Value Added, The Relationship between Central and Commercial Banks!

    Learn, Explain The Relationship between Central and Commercial Banks! 

    The following concept of relationship below are;

    Central Banks:

    A central bank, reserve bank, or monetary authority is an institution that manages a state’s currency, money supply, and interest rates. Central banks also usually oversee the commercial banking system of their respective countries. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base in the state, and usually also prints the national currency, which usually serves as the state’s legal tender.

    Central banks also act as a “lender of last resort” to the banking sector during times of financial crisis. Most central banks usually also have supervisory and regulatory powers to ensure the solvency of member institutions, prevent bank runs, and prevent reckless or fraudulent behavior by member banks.

    Commercial Banks:

    A commercial bank is an institution that provides services such as accepting deposits, providing business loans, and offering basic investment products. The commercial bank can also refer to a bank, or a division of a large bank, which more specifically deals with deposit and loan services provided to corporations or large/middle-sized business – as opposed to individual members of the public/small business.

    In developing economies, however, this is not so simple. Here a case is often made for entry of the central bank in some selected fields to promote the development of the economy; besides ensuring the growth of a sound banking structure to cope with the increasing needs of credit. Commercial bankers take this as an encroachment on their field.

    The Relationship between the commercial banks and the central banks:

    The relationship between the commercial banks and the central bank has to be based on reciprocity. The commercial banks should conform to the spirit of central bank directives rather than letters. On the other side, the central bank should invariably satisfy the genuine needs of the commercial banks in times of stresses and strains. A moral code of conduct between the two will have to be evolved, accepted and followed.

    They argue that the major part of the Central Bank’s funds comprise the reserves of the commercial banks meant for safeguarding their safety (liquidity). It would be immoral on the part of the central bank to compete in business with the commercial banks with their money. In view of the co-operation that the central bank often seeks from commercial banks for carrying out its policies, the central bank should not invite hostility from them by giving them unjust competition through its special privileges as the bankers’ bank and the banker of the government.

    In spite of these arguments, opinion has gone in favor of the undertaking of some commercial business by the central bank, especially in underdeveloped economies. A small amount of business can hardly affect the liquidity position of the ‘creator of liquidity’. It is not at all necessary that the central bank uses the commercial banks’ funds for this. It can set up a separate department for commercial business and create resources also.

    In fact, it may organize a special agent bank as its favored child for doing the arduous business necessary for economic development often avoided by commercial banks. Further, if the central bank feels that the steering wheel of credit control in its banks is loose and not functioning satisfactory, it may gain an edge of maneuverability by keeping in touch with the market through a limited amount of business.

    Besides, in an agriculturally depressed economy like India, the central bank may take up the onus of developing a bill market, granting direct loans, or discounting good bills of exchange. As regards direct loans, it may be a bit difficult to democrat clearly the central bank’s field vis-a-vis that of the commercial banks.

    The difficulty is removed if the central bank while doing ordinary commercial business keeps in mind that in its operations, the public interest and not profit-earning motive, prevails; what it can get done through commercial banks it never undertakes to do itself.

    The various quantitative and qualitative instruments of credit control should be judiciously used by the central bank. No doubt, the bank has the drastic weapons of reserve ratio requirements, open market operations or changes in the bank rate, etc. but none of them is fool-proof.

    After all, it is bank official on the spot who can judge between the credits asked for socially desirable productive purposes or credit being taken in the name of bonafide purposes, but to be used for some anti-social actions. Unless the commercial bank and the central bank provide willing co-operation, the one will be weakened and the other will be frustrated. This is why moral persuasion must be preferred now to direct action.

  • The relationship between Economic and Market Value Added!

    Whether a company has positive or negative Market Value Added (MVA)  depends on the level of rate of return compared to the cost of capital. All this applies to Economic Value Added (EVA) also. Stewart has defined the relationship between EVA and MVA. When a business earns a rate of return higher than its cost of capital, EVA is positive. In other words, investors are earning more than their investment in that business than they could elsewhere. In response, investors bid up share prices, increasing the value of their business and driving up its MVA. Similarly, investors discount the value of businesses that earn a return below their cost of capital. Also learned, The relationship between Economic and Market Value Added!

    Learn, Explain The relationship between Economic and Market Value Added! 

    Thus, MVA is an estimate made by the investors of the net present value of all current and expected future investments in the business. In other words, it can be said that MVA is same as NPV and can be calculated as the present values of all future EVAs. Similarly, it can be the present value of future free cash flows, because discounted EVA and discounted free cash flows are mathematical equivalents.

    What Does Economic Value Added (EVA)?

    What is the definition of economic value added? EVA compares the rate of return on invested capital with the opportunity cost of investing elsewhere. This is important for businesses to keep track of, particularly those businesses that are capital intensive. When calculating economic value added, a positive outcome means that the company is creating value with its capital investments.

    Definition: Economic value added (EVA) is a financial measurement of the return earned by a firm that is in excess of the amount that the company needs to earn to appease shareholders. In other words, it is a measure of an organization’s economic profit that takes into account the opportunity cost of invested capital and ultimately measures whether the organizational value was created or lost.

    What Does Market Value Added Mean?

    What is the definition of market value added? MVA is a vital concept that investors use to gauge how well the company has been using its capital. The state of MVA, either positive or negative, can reinforce or undermine the company’s current direction. If it is negative, the firm might decide to change directions in favor of a more value-oriented approach. Also, negative MVA signals to investors that the company is not using its capital effectively or efficiently. Thus, it’s not a good investment.

    Definition: Market value added (MVA) is a financial calculation that measures the capital that investors have contributed to a company in excess of the market value of the company. In other words, it measures if the firm has created positive value or destroyed value from its investors.

    From the definition of Market Value Added (MVA), the value of the firm can be expressed as Market Value = Capital + MVA of the firm.

    However, MVA is the present value of all future EVAs. Therefore, the value of the firm can be expressed as the sum of its capital; current EVA capitalized as perpetuity and the present value of all the expected future EVA improvements.

    Market Value = Capital + Value of current EVA as perpetuity+ Present value of expected EVA Improvement

    Since market value is dependent on the market implications of all future performance, market values are sensitive to the changes in current EVA as well as expected EVA improvement. This results in an interesting problem for the management. They need to decide the level of focus on generating current results and future prospects. The solution seems to be clear. Management must focus on producing the best results today a while making significant efforts for the future simultaneously. The stress has to be in the long term and short term perspective both.

    In a nutshell, the relationship between Economic Value Added (EVA) and Market Value Added (MVA)  can be summarized as follows:

    • The relationship between EVA and MVA is more complicated than the one between EVA and The firm value.
    • MVA of a firm reflects not only expected EVA of assets in place but also expected EVA from future projects.
    • To the extent that the actual EVA is smaller than expected EVA, the market value can decrease even if EVA is higher.

    Market Value Added (MVA)  is, thus, in a way best performance measure because it focuses on cumulative value added or lost on invested capital. It is the difference between the capital investors have put in business (cash in) and the value they could get by selling their claims (cash out). It is a focus on wealth in dollar or rupees rather than the rate of return in percentage. It, therefore, recognizes all value-adding investments even if than original rate of return.

  • The similarity between Financial and Management Accounting!

    The similarity between Financial and Management Accounting!

    Financial and management accounting plays an important part in the accounting information system. They co-exist in enterprise production and operation of management, constituting the modern enterprise accounting system together. Much information that management accounting required is from financial accounting, while financial accounting also put the established budget, standards organizations, and such daily accounting data from management accounting as the basic premise. Also learned, Creative Accounting, The similarity between Financial and Management Accounting!

    Learn, Explain The similarity between Financial and Management Accounting! 

    Management accounting is used primarily by those within a company or organization. Reports can generate for any period of time such as daily, weekly, or monthly. Reports are considering to be “future looking” and have forecasting value to those within the company. The main function of management accounting in the enterprise is to establish a variety of internal accounting control systems and provide internal management needs of a variety of data and information to improve operational efficiency and effectiveness.

    Financial accounting is used primarily by that outside of a company or organization. Financial reports are usually created for a set period of time, such as a fiscal year or period. The reports are historically factual and have predictive value to those who wish to make financial decisions or investments in a company.

    However, the reality is that financial and management accounting has been completely separated by an increasing number of companies, which according to their own accounting methods to double account the data at the aim of external reporting and internal management. It is hard to achieve information sharing between the two sets of data, resulting in the waste of resources and duplication of effort.

    Therefore, companies should integrate both accounting effectively together, and give full play to the function of the accounting information system to enable enterprises to obtain the dual needs of management and finance at the lowest financial cost.

    Similarities Between Financial and Management Accounting!

    What are the similarities? It is can be below are;

    Financial accounting:

    They focus on external services, but internal services are also including. The information which financial accounting provided on the funding, costs, profits, and other information is very important for business management. In particular, financial statements can comprehensive and reflect all aspects of the enterprise’s financial position and operating results. Study of the financial statements can grasp the overall situation of the enterprises, managers must first be aware of the overall situation, so that guide enterprises to continuously move forward.

    Therefore, managers must pay close attention, and be very concerned about the information providing by financial accounting. At the basis of the analysis of financial accounting, the plan could develop to enhance control and make a scientific decision, how to further improve management and increase economic efficiency could also study. So we can not say financial accounting is just the external services, not domestic services, we can only say that financial accounting focuses on external services.

    Management accounting:

    They focus on internal services, but it also contains external services. Investors and creditors concern about the enterprise’s financial position and operating results. To improve the enterprise’s financial position and operating results. Precondition can only base on strengthening internal management and improving. The work’s quality and effectiveness in the aspects of production and management. In this regard, management accounting contributes a lot to correct business decisions and the timely provision of useful information. At the same time, investors and creditors in their decision-making. Also, need to know several economic information provided by management accounting. Which has important reference value when they make the right judgments and policy decisions.

    Management accounting must obtain a variety of information from the different channels for planning and control of production and business activities. Such as financial information, statistics, business accounting information, and other relevant information. The most basic of which is financial information. Financial accounting has a fixed set of procedures and methods. Information will form according to some time production and business activities and their results through the registration books, weaving statements, etc. Which is not only for external use but also for internal use. Management accounting can develop base on financial information, making management accounting information to facilitate regulation, control, and decision making.

    The similarity between Financial and Management Accounting
    The similarity between Financial and Management Accounting, #Pixabay.

    Similarity:

    The functions of accounting are accounting and supervision. They have agreed to subordinate to the general requirements of a modern enterprise accounting. This means the users of accounting information provide relevant information, to achieve enterprise internal objectives and meet the requirements outside the enterprise. So the ultimate goal of accounting is the same.

    Both accounting is facing with self-improvement and development. They have to confront the reality of a common problem: how to use modern computer technology to collect, process, store, transmit, and report the accounting information; at the same time. They need to handle the demands of modern management properly according to the organization and implementation of accounting management.

  • Difference between Cost and Financial Accounting

    Difference between Cost and Financial Accounting

    Cost Accounting and Financial Accounting Difference: Cost Accounting refers to that branch of accounting that deals with costs incurred in the production of units of an organization. A common question asked around, What is the Difference between Cost Accounting and Financial Accounting? On the other hand, financial accounting refers to the accounting concerned with recording financial data of an organization, to exhibit the exact position of the business. Also, take look at the difference between Cost and Management Accounting.

    Learn, Explain the Difference between Cost and Financial Accounting!

    Cost accounting generates information to keep a check on operations, to maximize profit and efficiency of the concern. On the other hand, Financial accounting ascertains the financial results, for the accounting period and the position of the assets and liabilities on the last day of the period. There is no comparison between these two because they are equally important for the users. This article presents you with the difference between cost accounting and financial accounting in tabular form.

    Definition of Cost Accounting:

    Cost Accounting is the field of accounting that uses to record, summarise, and report the cost information on a periodical basis. Its primary function is to ascertain and control costs. It helps the users of cost data to make decisions regarding the determination of selling price, controlling costs, projecting plans and actions, efficiency measurement of the labor, etc. also, Cost Accounting adds to the effectiveness of financial accounting by providing relevant information which ultimately results in the good decision-making process of the organization. It traces the cost incurred at each level of production, i.e. right from the input of the material till the output produced, every cost records.

    There are two types of Cost Accounting systems, they are:

    • Non – Integrated Accounting System: The accounting system in which a separate set of books is maintaining for cost information.
    • Integrated Accounting System: The accounting system in which cost and financial data are maintaining in a single set of books.

    Definition of Financial Accounting:

    Financial Accounting is the branch of accounting, which keeps the complete record of all monetary transactions of the entity and reports them at the end of the financial period in proper formats that increases the readability of the financial statements among its users. Also, The users of financial information are many i.e. from internal management to outside parties. Preparation of financial statements is the major objective of financial accounting in a specified manner for a particular accounting period of an entity.

    It includes an Income Statement, Balance Sheet, and Cash Flow Statement which helps in, tracing out the performance, profitability, and financial status of an organization during a period. Also, the information provided by financial accounting is useful in making comparisons between different organizations and analyzing the results thereof, on various parameters. In addition to this, the performance and profitability of various financial periods can also be compared easily.

    Comparison of Cost and Financial Accounting:

    Basis For Comparison Cost Accounting Financial Accounting
    Meaning: Cost Accounting is an accounting system, through which an organization keeps the track of various costs incurred in the business in production activities. Financial Accounting is an accounting system that captures the records of financial information about the business to show the correct financial position of the company on a particular date.
    Information type: Also, Records the information related to material, labor, and overhead, which are used in the production process. Records the information which are in monetary terms.
    Which type of cost is used for recording? Both historical and pre-determined cost Only historical cost.
    Users: Information provided by the cost accounting uses only by the internal management of the organization like employees, directors, managers, supervisors, etc. Also, Users of the information provided by financial accounting are internal and external parties like creditors, shareholders, customers, etc.
    Valuation of Stock: At cost Cost or Net Realizable Value, whichever is less.
    Mandatory: No, except for manufacturing firms it is mandatory. Yes for all firms.
    Time of Reporting: Details provided by cost accounting are frequently prepared and reported to the management. Financial statements are reported at the end of the accounting period, which is normally 1 year.
    Profit Analysis: Generally, the profit is analyzed for a particular product, job, batch, or process. Income, expenditure, and profit are analyzed together for a particular period of the whole entity.
    Purpose: Reducing and controlling costs. Also, Keeping a complete record of the financial transactions.
    Forecasting: The forecasting is possible through budgeting techniques. The forecasting is not at all possible.

    The upcoming discussion will update you on the difference between cost and financial accounting.

    The Difference in Cost Accounting:

    The following difference below are;

    • Cost Accounting explains the prin­ciples, techniques, and methods for ascertaining the cost and to find out the variance in comparison with the standard and enquire reasons for such variation.
    • The objective of cost accounting is to ascertain the cost and allocates the same in respective places.
    • It applies to the manufacturing and service industries.
    • Also, Cost accounting supplies necessary information’s to the management for decision-making purposes.
    • Stocks are valued as per cost price in cost accounting.
    • Cost accounting determines the profit or loss of each item of product, process, etc.
    • There is no particular period for ascertaining the cost of a product.
    • Also, Cost accounting is based on the concept of costing principles.
    • They include data based on facts and figures and also on some estimates.
    • Also, Cost accounting considers the requirements of Sec. 209(1) of the Companies Act.
    • Cost accounting control, material labor and overhead costs with the help of Standard costing, Budgetary control, etc.
    • Usually, cost accounting provides services to internal management.
    The Difference in Financial Accounting:

    The following difference below are;

    • Financial accounting maintains records for keeping accounts rela­ting to all monetary transactions.
    • The objective of financial accoun­ting is to maintain records and to prepare final accounts.
    • It is applicable in all cases.
    • Also, Financial accounting supplies information’s to the management relating to profit or loss and financial positions.
    • In financial accounting, stocks are valued as per cost price or market price whichever is lower.
    • Financial accounting shows the profit or loss of a firm as a whole at a particular date.
    • In Financial Accounting, accounts are prepared periodically, usually at the end of the period.
    • Also, Financial accounting bases on the concept of GAAP.
    • Financial accounting takes data based on facts and figures only.
    • They meet the requirements of the Companies Act 1956, Sales Tax, Income-Tax, etc.
    • Financial accounting does not have any tool to control the financial tran­saction of the business.
    • Also, Financial accounting provides information to the internal as well as external users of accounting information.

    The Main point of Differences Between Cost and Financial Accounting:

    Difference between Cost and Financial Accounting
    Difference between Cost and Financial Accounting

    The following are the major differences between cost accounting and financial accounting:

    • Cost Accounting aims at maintaining the cost records of an organization. Also, Financial Accounting aims at maintaining all the financial data of an organization.
    • Cost Accounting Records both verifiable and pre-decided costs. On the other hand, Financial Accounting records just chronicled costs.
    • Also, Clients of Cost Accounting are restricted to interior administration of the element; though clients of Financial Accounting are inside just as outside gatherings.
    • In cost, accounting stock qualities at cost while in financial accounting, the stock qualities at the lower of the two for example cost or net feasible worth.
    • Cost Accounting is obligatory just for the association which participates in assembling and creative exercises. Then again, Financial Accounting is obligatory for all associations, just as consistent with the arrangements of the Companies Act and Income Tax Act, is additionally an unquestionable requirement.
    • Also, cost Accounting data reports intermittently at continuous spans; yet financial accounting data reports after the fruition of the financial year for example for the most part one year.
    • Cost Accounting data decide benefit identified with a specific item, work, or cycle. Instead of Financial Accounting, which decides the benefit for the entire association made during a specific period.
    • Also, the motivation behind Cost Accounting is to control costs; yet the reason for financial accounting is to keep total records of the financial data, in light of which detailing should be possible toward the finish of the accounting time frame.
  • Difference between Cost and Management Accounting

    Difference between Cost and Management Accounting

    Cost and Management Accounting Difference; Cost accounting is a branch of accounting that aims at generating information to control operations to maximize profits and the efficiency of the company, that is why it is also termed control accounting. A common question asked around, What is the difference between the Cost Accounting and Management Accounting? Conversely, management accounting is the type of accounting that assists management in planning and decision-making and is thus known as decision accounting. Also learned, Financial and Management Accounting.

    Learn, Explain the Difference between Cost and Management Accounting.

    The two accounting system plays a significant role, as the users are the internal management of the organization. While cost has a quantitative approach, i.e. it records data that is related to money, management emphasizes both quantitative and qualitative data. Now, let’s understand the difference between cost accounting and management accounting, with the help of the given article.

    Definition of Cost Accounting:

    They are a method of collecting, recording, classifying, and analyzing the information related to cost. Also, the information provided by it is helpful in the decision-making process of managers. There are three major elements of cost which are material, labor, and overhead. The main aim of cost accounting is to track the cost of production and fixed costs of the company. Also, this information is useful in reducing and controlling various costs. It is very similar to financial accounting, but it is not reported at the end of the financial year.

    Definition of Management Accounting:

    Management Accounting refers to the preparation of financial and non-financial information for the use of management of the company. It is also termed managerial accounting. Also, the information provided by it helps make policies and strategies, budget, forecasting plans, making comparisons, and evaluating the performance of the management. The reports produced by management accounting are used by the internal management of the organization, and so they are not reported at the end of the financial year.

    Comparison of Cost and Management Accounting:

    The Basis of Comparison Cost Accounting Management Accounting
    Meaning The recording, classifying, and summarizing of cost data of an organization is known as cost accounting. Also, the accounting in which both financial and non-financial information is provided to managers knows as Management Accounting.
    Information Type Quantitative. Quantitative and Qualitative.
    Objective Ascertainment of cost of production. Providing information to managers to set goals and forecast strategies.
    Scope Concerned with ascertainment, allocation, distribution, and accounting aspects of cost. Impart and effect aspect of costs.
    Specific Procedure Yes No
    Recording Records past and present data It gives more stress on the analysis of future projections.
    Planning Short-range planning Short-range and long-range planning
    Interdependency Can install without management accounting. Cannot install without cost accounting.

    The upcoming discussion will help you to differentiate between cost and management accounting.

    The main difference between Cost and Management Accounting:

    The following difference below are;

    Objective:

    The primary objective of Cost Accounting is to ascertain the cost of production as well as to control the same after careful analysis. On the other hand, the primary objective of Management Accounting is to supply the accounting information to the management for taking the proper decision.

    Method:

    In Cost, accounts are prepared according to predetermined standards and budgets. But in Management reports are submitted to the management after measuring the variance between the actual performances and the budgets. As a result, past errors and defects may rectify and, thereby, efficiency improves.

    Accounting System:

    The Double Entry System can apply in Cost Account, if necessary, whereas this is not adopting in the case of Management Account.

    Accounting Period:

    Normally, in Cost, statements of the current year’s activities are to prepare, i.e., importance is not according to future activities while, in Management, primarily future activities are considering.

    Management Accounting relates to the whole affair of the concern, the capacity for making profits or losses, and the expectation for the future. To discharge its duties properly, it has to depend on both Financial Accounting and Cost Accounting. Therefore, Management Accounting may regard as the expansion of these two forms of accounting, viz., Financial Account, and Cost Account.

    The main points of the difference between Cost and Management Accounting:

    • The accounting related to the recording and analyzing of cost data is cost account. Also, the accounting related to producing information which uses by the management of the company is management account.
    • Also, Cost provides quantitative information only. On the contrary, Management provides both quantitative and qualitative information.
    • Cost is a part of Management as the information uses by the managers for making decisions.
    • The primary objective of Cost Accounting is the ascertainment of the cost of producing a product but the main objective of management accounting is to provide information to managers for setting goals and future activity.
    • There are specific rules and procedure for preparing cost accounting information while there is no specific rules and procedures in case of management accounting information.
    • The scope of Cost Account limits to cost data however the Management Account has a wider area of operation like the tax, budgeting, planning and forecasting, analysis, etc.
    • Cost related to the ascertainment, allocation, distribution, and accounts face of cost. On the flip side, management associates with the impact and effect aspect of cost.
    • They stress short-range planning, but management accounting focuses on long and short-range planning, for which it uses high-level techniques such as probability structure, sensitivity analysis, etc.
    • While management accounting can’t install in the absence of cost accounting; Also, cost accounting has no such requirement, it can install without management accounting.

    Difference between Cost and Management Accounting
    Difference between Cost and Management Accounting.