The primary distinction between Accounting and. Accounting is that Accounting is the procedure of recording, preserving, and reporting on the financial operations, which indicates the business’s financial standing. On the other hand, auditing is the process of systematically examining the books of accounts and other records of the business to determine whether the report is the truth and fair to the company.

Accounting vs. Auditing

Accounting is the act of keeping track of the monetary records of a company to aid in the preparation of financial statements that will provide a complete and fair picture of the company’s business operations. Based on Colgate’s SEC Filings, they must create financial statements by the authority’s regulations.

However, the auditing process evaluates financial statements created by the accounting function. Its purpose is to guarantee the credibility of the financial statements. For example, in the case of Colgate, PricewaterhouseCoopers LLP audited the effectiveness of Colgate’s internal control over financial reporting in 2016.

In this article, you will learn about Accounting vs. Auditing in greater detail –

  • How do you define Accounting?
    • #1 – Financial Accounting
    • #2 – Cost Accounting
    • #3 – Managerial Accounting
  • Auditing is what?

Is Accounting Accounting?

Accounting is the primary language used in business. Every business is evaluated using numbers. The numbers are derived using accounting. Let us consider a few simple examples of what numbers are needed by business people on a day-to-daily basis:

  • What is the amount of merchandise sold during the current quarter/month/year?
  • How much is the overall amount of the month/quarter/year?
  • Is the business making an income or incurring massive losses? In both cases, how much of this loss or profit? What percentage of profit or loss versus all sales?
  • How much savings (positive saving is the company has gained, while the negative savings will indicate that the company has invested more) in terms of cost compared to the last month?
  • How many employees currently work for the company?
  • Which is your profit margin for your company?
  • What has been the development of the business in the last ten years?
  • What is the market part of the business?
  • What is the revenue of each retail outlet in the business?

The questions mentioned above can be answered by using accounting. Accounting is a variety of branches, including:

#1 – Financial Accounting

The principal purpose of financial accounting is the maintenance and processing, aggregating of the information, analyzing, and summarizing of the financials of the company to provide a complete and fair picture to all external and internal parties of the business.

As can be seen in the image below, drawn from Colgate 10K, the primary goal of financial accounting is to create financial statements, precisely the Balance Sheet, Income Statement, and cash flow.

source: Colgate 10K Filings

The following is a graphic illustration of the process of financial accounting:

#2  Cost Accounting

Cost accounting is helpful in estimating the cost of various products. It can help determine the price of complex products that require different ingredients, processes, and components in their production. It also assists in identifying the significant cost (fixed and variable) for each product and the break-even point of the products.

This is a vital function for any business. It first calculates costs, which help determine the merchandise’s selling value. The selling price is determined based on a variety of factors like the margin percentage of the business and market competitiveness, the method used to sell the product, and so on.

If you’re looking to learn Cost Accounting professionally, You might want to look at the 14+ hours of videos from Instruction about Cost Accounting.

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3 – Management Accounting

This section is more to be concerned with planning and supporting decision-making. The information gathered from different areas of accounting is scrutinized further to make strategic choices and develop a road map. In this case, reports (MIS, the acronym for Management Information System) are prepared. Management Information systems) are produced daily, weekly, or monthly for an internal audience, including Chief Financial Officer and chief executive officer managers, and other executives at the top who make educated decisions for the business. They can gain an understanding of the situation and make more informed decisions. These decisions are planning capital expenditures, trend analysis forecasting, etc.

Other accounting types include Tax Accounting, Human Resource Accounting, Government Accounting, etc.

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How do you define auditing?

Auditing is the process that involves checking, verifying, and reviewing financial statements. Since financial statements are compiled using an organization’s financial records, auditing consists of financial auditing records.

It is used to determine the validity and reliability of the accounting data presented in financial statements.

Auditing could be considered an activity that occurs after the death of a person. After an accounting and financial process has been completed for a particular year, the auditing process can begin.

Auditing is often divided into Internal audits and external audits. Audit

costing various products