Difference between Cost Accounting and Management Accounting

 Though Management accounting uses the tools of cost accounting like standard costing, marginal costing etc. and many people think that both cost and management accounting are same which is not the case because there are many differences between the two, here are some of them – 

 Objectives

Cost Accounting Management Accounting

The main objectives of Cost accounting are the ascertainment of cost, cost control and cost analysis.

The main objectives of Management Accounting are to help management at all level so that productivity and efficiency can be improved through planning, improved decision making and more effective control.

Recording Of Data

It records available cost data by operating a cost recording systems. When this information is available it is ofter compared with an estimated, budgeted cost.

It uses both cost and financial information to advise management in planning and controlling the organization.

Concern

Cost accounting focuses on current years activities.

Management accounting is concerned with short range and long range planning. Approach

Cost accounting is mostly historical in its approach and it projects the past.

Management accounting is  futuristic in its approach. It is more predictive in nature than cost accounting.

Area of Operation

Cost accounting operates in restricted areas .

Management accounting has almost an unrestricted area operation since it is concern with the system as a whole and the overall vitality of the organization.

Area of Operation

Cost accounting operates in restricted areas .

Management accounting has almost an unrestricted area operation since it is concern with the system as a whole and the overall vitality of the organization.

Users

Cost accounting is done for internal parties like top management, owners as well as external parties like creditors, employees, government

Management accounting is done for top management only

Scope

Cost accounting was evolved many years back and it is limited in its scope.

management accounting is still evolving but its scope is much wider than that of cost accounting because it uses along with cost accounting other principals of subjects like statistics, economics etc

 

 Difference between financial accounting and cost accounting:

 

	FINANCIAL ACCOUNTING	COST ACCOUNTING
OBJECTIVE	It provides information about	It provides information of

	financial performance and financial position of the business.	ascertainments of costs to control costs and for decision making about the costs.
NATURE	It classifies records, presents and interprets transactions in terms of money.	It classifies, records, presents and interprets in a significant manner materials, labour and overhead costs.
RECORDING OF DATA	It records historical data.	It records and presents estimated, budgeted data. It makes use of both historical costs and predetermined costs.
USERS OF INFORMATION	External users like shareholders, creditors, financial analysts, government and its agencies,etc.	Used by Internal management at different levels.
ANALYSIS OF COSTS AND PROFITS	It shows profit/loss of the organization.	It  provides details of costs and profit of each product, process, job,etc.
TIME PERIOD	They are prepared for a definite period, usually a year.	They are prepared as and when required.
PRESENTATION OF INFORMATION	A set format is used for presenting financial information.	There are no set formats for presenting cost informations.

OBJECTIVES OF COST ACCOUNTING. Is Financial accounting cost accounting

 Cost accounting is usually involved with management accounting. Financial accounting tends to deal with the past and presents information like statements for public and private use. Management accountants are involved with the budgeting and costing sides of things and present information only for the sole users of the business, so only internal uses like management, shareholders etc.

Financial accounting refers to the branch that prepared financial reports (known as financial statements) that are for general use. Primarily however, they are prepared for external users (owners, investors, government, suppliers, creditors). The goal of financial accounting is to provide financial statements that follow generally accepted accounting standards or GAAP. Cost accounting is the branch that focuses on manufacturing costs, i.e. direct materials, direct labor, and factory overhead. It is often considered part of management accounting, the branch that provides information for internal purposes and focuses on helping management make   decisions   instead   of   strictly   complying   with   GAAP.   Cost accounting deals with manufacturing concerns.

  

OBJECTIVES OF COST ACCOUNTING

 

The main objectives of cost accounting are:

 

1.   To determine the cost of a product, process or service

 2.   To analyse, classify and record all expenditures with respect to the cost of product, process or service in order to determine its cost

 3.   To provide necessary information to the management in time

 4.   To provide data needed for periodical preparation of profit and loss account and balance sheets

5.   To serve as a guide by providing actual data for comparison

 6.   To facilitate price fixation and offering quotations

 7.   To assist budgetary control

 8.   To assist cost control and cost reduction

 9.   To record the relative production results in each unit of plant to examine efficiency

 10. To provide the basis for production planning and for avoiding wastages of materials and stores

 11. To provide data for different periods and various volumes of output for effective planning and future expansion of business

 12. To provide the basis for making decisions such as:

 1.   To shut down or operate

 2.   To make or buy

 3.   To continue with existing plant/machinery or to replace it

 4.   To determine cost–volume–profit relationship

To assist the management in devising suitable policy decisions in other key areas