Friday, August 15, 2014

Difference between Management, Financial and Cost Accounting

Difference between Cost accounting and Management Accounting
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.
Basis
Cost accounting
Management accounting
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.
Management according deals with future projections on the basis of historical and present cost data.
c)    Principles
Established procedures and practices are followed in cost accounting.
No such prescribed practices are followed in Management accounting.
d)   Data
Cost accounting uses only quantitative information.
Management accounting uses both qualitative and quantitative information.
e)   Scope
Cost accounting is concerned mainly with cost ascertainment and control.
Management accounting includes, financial accounting, cost accounting, budgeting, tax planning and reporting to management.
f)    Status
The Status of cost accountants comes after management accountant.
Management accountant is senior in position to cost accountant.
g)   Tools and techniques
It has standard costing, variable costing, break even analysis etc. as the basic tools and techniques.
Along with these, management accountant has funds and cash flow statements, ratio analysis etc. as his tools and techniques.
h)   Installation
It can be installed without management accounting.
It needs financial and cost accounting as its base for its installation.

Difference between Financial Accounting and Management Accounting
The accounting system concerned only with the financial state of affairs and financial results of operations is known as Financial Accounting. It is the original form of accounting. It is mainly concerned with the preparation of financial statements for the use of outsiders like creditors, debenture holders, investors and financial institutions. The financial statements i.e., the profit and loss account and the balance sheet, show them the manner in which operations of the business have been conducted during a specified period.

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.

Basis
Financial accounting
Management accounting
a)      Objectives
The main objective of financial accounting is to supply information in the form of profit and loss account and balance sheet to outside parties like shareholders, creditors, government etc.
The main objective of management accounting is to provide information for the internal use of management.

b)      Performance
Financial accounting is concerned with the overall performance of the business.
Management accounting is concerned with the departments or divisions. It report about the performance and profitability of each of them.

c)       Data
Financial accounting is mainly concerned with the recording of past events.
Management accounting is concerned with future plans and policies.
d)      Nature
Financial accounting is based on measurement.
Management accounting is based on judgment.
e)      Accuracy
Accuracy is an important factor in financial accounting.
Approximations are widely used in management accounting.
f)       Legal Compulsion
Financial accounting is compulsory for all joint stock companies.
Management accounting is optional.

g)      Monetary transactions
Financial accounting records only those transactions which can be expressed in terms of money.
Management accounting records not only monetary transactions but also non- monetary events.
h)      Control
Financial accounting will not reveal whether plans are properly implemented.
Management accounting will reveal the deviations of actual performance from plans. It will also indicate the causes for such deviations.
i)        Stock Valuation
In cost accounts stocks are valued at cost.
In financial accounts, stocks are valued at cost or realisable value, whichever is lesser.

j)        Analysis of Profit and Cost
Cost accounts reveal Profit of Loss of different products, departments separately.
In financial accounts, the Profit or Loss of the entire enterprise is disclosed into.


Labels

Absorption Costing (1) Accountancy (4) accounting for partnership firms (3) Accounting for Share Capital (3) accounts of non trading concern (3) advanced financial accounting (13) AHSEC (92) ahsec 11 (47) ahsec 12 (60) ahsec notes (89) AHSEC Question Papers (27) Assam Slet (10) bcfm (11) bills of exchange (6) branch accounting (3) Budgetary Control (3) Budgetary Control Notes (2) business communication (29) Business Environment Notes (7) business regulatory framewrok (47) Business Statistics Notes (23) cash flow statement (5) cbse 12 (19) cbse notes (27) commerce (13) company law (23) corporate accounting (33) corporate laws (14) cost accounting (62) cost and management accounting (34) cpt (36) cpt 200 (7) cpt notes (30) dibrugarh university (905) dibrugarh university notes (510) dibrugarh university question paper (291) dibrugarh university solved papers (200) dibrugarh university syllabus (47) direct tax law (49) eco - 01 (4) ECO - 02 (2) ECO - 03 (2) ECO - 05 (6) ECO - 06 (1) ECO - 07 (1) eco - 08 (4) eco - 09 (1) ECO - 10 (2) ECO - 11 (3) ECO - 12 (7) ECO - 13 (2) ECO - 14 (4) entrepreneurship (14) fianancial accounting (3) financial accounting (48) Financial Accounting Notes (11) financial management (18) Financial statements analysis (10) funds flow statement (3) guwahati university (305) guwahati university syllabus (54) Hire Purchase (5) Human Resource Management (14) icwai (38) icwai notes (39) ignou solved assignments (57) ignou solved question papers (63) income from house property (5) income from salary (4) Income Under the head Salaries (11) information technology (10) Installment Purchase (4) issue of shares (4) kkhsou (13) M.com (63) Management Accounting Notes (25) MCQ (11) paper I (1) paper II (9) paper III (1) principle of business mangement (16) Principles of Marketing Notes (16) royalty accounts (3) sale of goods act (8) semester I (157) Semester II (136) semester III (64) semester IV (126) semester V (101) semester VI (67) slet (13) Slet Ne (10) Small Business Management (5) solved assignments (22) UGC - NET: Commerce (08) (14) UGC - NET: Commerce (08) Paper II (3) UGC - NET: Commerce (08) Paper III (14) ugcnet solved question papers (23) Variance Analysis Notes (1)