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Prepared by

Lecia Allen

MSc., Bsc., T.Dip

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Cost accounting deals with calculation

(allocation, apportionment and absorption)

and measurement of resources utilized for

different business activities, usuallyproduction and service provision. It relates

to calculation of per unit cost using different

costing techniques.

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On the other hand Management accounting

relates to the use of all such information

gathered and processed by cost accounting

along with financial accounting, bymanagement. Management accounting is

about getting the information from cost

accountants and financial accountants and

then using it for decision making purposes.

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Therefore, cost accounting supports management

accounting and in turn management accounting

pushes cost accounting further according to theneeds of the management. Because of this strong

bond between cost accounting and management

accounting they are to mean one and the same

thing now-a-days.

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Financial accounting defined as the

representation of the company or firms

activities done during the period and its

financial position at the end of theaccounting period. It deals with the

preparation and presentation of financial

statements namely Balance Sheet, Profit and

Loss Account, Cash Flow Statement and

Statement of Changes in Equity.

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Cost Accounting helps in the determination

of the cost of the product, how to control it

and in making decisions. It makes use of both

past and present data for ascertainment ofproduct cost. There is no specific format for

the preparation of cost accounting

statements.

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It is used by the internal management of the

company and usually the cost accountant prepares

this to ascertain the cost of a particular producttaking into account the cost of materials, labor and

different overheads. No certain periodicity is

needed for the preparation of these statements and

they are needed as and when required by themanagement.

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This makes use of certain rules and regulations

while computing the cost of different products in

different industries.

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Financial Accounting gives out information

about the enterprises financial activities and

situation. It makes use of the past or

historical data. All the transactions andstatements are recorded and presented in

terms of money mostly. Persons who make

use of these financial statements are

outsiders like banks, shareholders, creditors,

government authorities etc.

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Financial statements are usually presented once in

a year and there is a certain format for their

presentation. It is mandatory for the companies tofollow the rules and policies framed under GAAP

(Generally Accepted Accounting Principles). It

indicates whether the company is running at a loss

or profit.

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Unlike the above two accounting,

Management Accounting deals with both

quantitative and qualitative aspects. This

involves the preparation of budgets andforecasts to make viable and valuable future

decisions by the management. Many

decisions are taken based on the projected

figures of the future.

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There is no question of rules and regulations to be

followed while preparing these statements but the

management can set their own principles. Like costaccounting, in management accounting also there is

no specific time span for its statement and report

preparation. It makes use of both cost and

financial statements as well to analyze the data.

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Management accounting measures and reportsfinancial and non-financial information thathelps managers make decisions to fulfill thegoals of an organization

Managers use management accountinginformation to

choose, communicate and implement strategy

coordinate product design, production and marketingdecisions

Management accounting focuses on internalreporting

Management accounting is future oriented

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accumulate data and report reliable results to all

levels of management

Attention-directing

make visible opportunities and problems on

which managers need to focus

Problem-solving conduct comparative analysis to identify the best

alternatives in relation to the organizations

goals

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1. To determine the per unit cost of a

product/service

2. To guide the management of firms about the

cost of the product/service

3. Helps them to set the prices of product

according to cost of product rather arbitrary

pricing

4. Helps management to achieve their target

profit efficiently

5. Guides the government about the pricing of

products so that governments can maintain

prices of basic products for consumers.

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