Cost Accounting is a branch of accounting and has been developed due to limitations of financial accounting. Financial accounting is primarily concerned with record keeping directed towards the preparation of statement of Profit and Loss and statement of financial position. It provides information regarding the profit and loss that the business enterprise is making and also its financial position on a particular date. The financial accounting reports help the management to control in a general way the various functions of the business but it fails to give detailed reports on the efficiency of various divisions.

Required

What are the limitations of Financial Accounting which has led to the development of Cost Accounting? 

What are the relationship between Financial Accounting and Cost Accounting? 

Cost accounting is useful and applicable in business organizations and its environment in many ways.

Required

Explain the areas in which cost accounting may be useful in an organization

 

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and- 10 d Exercises Exercise 10-1 Objective: To calculate cost of goods sold Directions: From the following data, calculate Maxon Company's cost of goods sold for 20X1. Item Beginning merchandise inventory Purchases during the period Freight in Purchases retums and allowances Purchases discounts Ending merchandise inventory Exercise 10-2 Objective: To calculate income statement amounts Directions: From the following data, calculate (a) net sales, (b) cost of goods sold, (c) gross profit, and (d) net income or net loss. Item Sales Sales returns and allowances Sales discounts Beginning merchandise inventory Purchases Ending merchandise inventory Operating expenses Beginning Net Net Sales Inventory $118,900 110,400 81,230 Exercise 10-3 Objective: To calculate missing financial statement items Directions: Calculate the missing items in the following table: $38,000 Amount $ 47,610 114,750 3,375 14,875 3,145 38,910 Purchases $72,100 65,200 118,000 Amount $437,600 21,600 9,520 37,510 307,300 43,710 82,450 Goods Available for Ending Sale $ 98,600 145,000 Inventory $19,000 31,000 Cost of Goods Sold $73,400 Gross Profit Exercise 10-4 Objective: To prepare financial statements and journalize closing entries Directions: The financial statement columns of the December 31, 20X4, work sheet for McGaw Company are on page 486. Prepare (1) an income statement, (2) a statement of owner's equity, and (3) a balance sheet, and (4) journalize closing entries. and- 10 d Exercises Exercise 10-1 Objective: To calculate cost of goods sold Directions: From the following data, calculate Maxon Company's cost of goods sold for 20X1. Item Beginning merchandise inventory Purchases during the period Freight in Purchases retums and allowances Purchases discounts Ending merchandise inventory Exercise 10-2 Objective: To calculate income statement amounts Directions: From the following data, calculate (a) net sales, (b) cost of goods sold, (c) gross profit, and (d) net income or net loss. Item Sales Sales returns and allowances Sales discounts Beginning merchandise inventory Purchases Ending merchandise inventory Operating expenses Beginning Net Net Sales Inventory $118,900 110,400 81,230 Exercise 10-3 Objective: To calculate missing financial statement items Directions: Calculate the missing items in the following table: $38,000 Amount $ 47,610 114,750 3,375 14,875 3,145 38,910 Purchases $72,100 65,200 118,000 Amount $437,600 21,600 9,520 37,510 307,300 43,710 82,450 Goods Available for Ending Sale $ 98,600 145,000 Inventory $19,000 31,000 Cost of Goods Sold $73,400 Gross Profit Exercise 10-4 Objective: To prepare financial statements and journalize closing entries Directions: The financial statement columns of the December 31, 20X4, work sheet for McGaw Company are on page 486. Prepare (1) an income statement, (2) a statement of owner's equity, and (3) a balance sheet, and (4) journalize closing entries.

Answer rating: 100% (QA)

The limitations of Financial Accounting that have led to the development of Cost Accounting are as follows 1 Lack of Detailed Information Financial Accounting provides a summary of financial transacti... View the full answer