Cost Accounting, Management Accounting and Financial Accounting

Financial Accounting
Cost Accounting
1.    Nature
Financial accounts are maintained on the basis of historical records.
Cost accounts lay emphasis on both historical and predetermined costs.
2.    Use
Financial Accounting is used even by outside entities.
Cost Accounting is used only the management of the concern.
3.    System
Financial Accounting uses the double-entry system for recording financial data.
Cost Accounting does not use the double-entry for collecting cost data.
4.    Scope
Financial Accounting covers all items of income and expenditure whether related to the cost centers or not,
Cost Accounting covers all items related to a cost centre.
5.    Reports
Financial Accounting results are shown P&L A/c and balance sheet.
Cost Accounting results are shown in Cost Sheet/ Coating Profit& Loss A/c/ Reports Contract A/c/ Process A/c.
6.    Period
Financial Accounting is for a specific period.
Cost Accounting concentrates on cost centers and not on period.
7.    Stock Valuation
In financial accounts, stocks are valued at cost or realisable value, whichever is lesser.
In cost accounts stocks are valued at cost.
8.    Analysis of Profit and Cost
In financial accounts, the Profit or Loss of the entire enterprise is disclosed into.
Cost accounts reveal Profit of Loss of different products, departments separately.

Cost accounting and Management accounting are two modern branches of accounting. Both the systems involve presentation of accounting data for the purpose of decision making and control of day-to-day activities. Cost accounting is concerned not only with cost ascertainment, but also cost control and managerial decision making.
Management accounting makes use of the cost accounting concepts, techniques and data. The functions of cost accounting and management accounting are complimentary. In cost accounting the emphasis is on cost determination while management accounting considers both the cost and revenue. Though it appears that there is overlapping of areas between cost and management accounting, the following are the differences between the two systems.
a)      Purpose: The main objective of cost accounting is to ascertain and control the cost of products or services. The function of management accounting is to provide information to management for efficiently performing the functions of planning, directing, and controlling.

b)      Emphasis: Cost accounting is based on both historical and present data, whereas management according deals with future projections on the basis of historical and present cost data.

c)       Principles and Procedures: Established procedures and practices are followed in cost accounting. No such prescribed practices are followed in Management accounting. The analysis is made and the resulting conclusions are presented in reports as per the requirements of the management.

d)      Data Used: Cost accounting uses only quantitative information whereas management accounting uses both qualitative and quantitative information.

e)      Scope: Management accounting includes, financial accounting, cost accounting, budgeting, tax planning and reporting to management, whereas Cost accounting is concerned mainly with cost ascertainment and control.

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