Question

Question 4 Differentiate between the following:
a. Financial accounting and management accounting   
b. Accrual and Prepayment.     
c. Bad debt and Provision for bad debt.  

Answer 1

a. Financial accounting refers to the aggregation of accounting information into the financial statements where as management accounting is a internal process used to account business transactions.

b. Prepayment means paying the expenses before the due occurs or prior payment of such expenditure on balance sheet date eg.Payment of plant insurance for the calendar year I.e., 1.1.2020 to 31.12.2020 , in such case at balance sheet date I.e.on 31.03.2020 9 months insurance is will become prepaid

Accrual means accumulated expense or income that is not realised yet

c. Bad debt means debt not realisable in future, provision will provide to write off from the books and that will be charged to P&L account in the form of provision