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In Cost accounting, the main emphasis is on cost information and cost control (managerial use) whereas in management (managerial) accounting the main emphasis is on decision-making and provides information through financial reports.
Financial
Accounting is “the art of recording, classifying and summarizing in a significant
manner in terms of money transactions and events which are in part at least of a
financial character, and interpreting the results thereof”. Accounting is the language
effectively employed to communicate the financial information of a business unit of
various parities interested in its progress.
The object of financial accounting is to find out the profitability and to provide
information about the financial position of the concern. Two important statements of
financial accounting are Income and Expenditure Statement and Balance Sheet.
All revenue transactions relating to a particular period are recorded in this statement
to decide the profitability of the concern. The balance sheet is prepared at a particular
date to determine the financial position of the concern
1.6.2 Cost Accounting
Cost accounting is one of the important elements of accounting information about the
problems of internal managerial control. Financial accounts are unable to meet
information needs about the cost structure of a product. The need for cost
determination and controls necessitated new set of principles of accounting and thus
emerged ‘Cost accounting’ as a specialised branch of accounting. Cost accounting is
the process of accounting for costs. It includes the accounting procedures relating to
recording of all income and expenditure and preparation of periodical statements and
report with the object of ascertaining and controlling costs. Such cost accounting is a
good technique for ascertaining profitability and for decision making
Management Accounting
Cost accounting helps the internal management by directing their attention on
inefficient operations and assisting in a day-to-day control of business activities.
The costing data needs to be arranged, re-analysed and processed further for effective
role in managerial process. In addition to costing and accounting data, managerial
functions need the use of socio-economic and statistical data (e.g., population
break-ups, income structure, etc.). Cost and financial accounting do not provide such
information and this limitation pave the way for the emergence of management
accounting. Management accounting is a systematic approach to planning and control
functions of management. It generates information for establishing plans andcontrols. It provides for a system of setting standards, plans, or targets and reporting
variances between planned and actual performances for corrective actions. Thus,
Management accounting consists of cost accounting, budgetory control, inventory
control, statistical methods, internal auditing and reporting. It also covers financial
accounting.
Management accounting is the process of identification, measurement, accumulation,
analysis, preparation, interpretation and accumulation of financial information used
by management to plan, evaluate, and control within an organisation and to assure
appropriate use of and accountability for its resources.
Helping to take the right desicions and planning
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