What is Cost Accounting?
Cost accounting is referred to as a form of managerial accounting that is used by businesses to classify, summarize and analyse the different costs with the purpose of cost control and cost reduction and thereby helping management in making better decisions.
The primary function of cost accounting is said to be arranging, recording and identifying suitable investment allocation for investment to determine the costs of goods and services. It also helps in presenting relevant data to the management related to service, contract or finding shipment cost.
It also includes information related to cost of production, distribution and selling.
You might also want to know: Difference between Fixed Cost and Variable Cost
What is Financial Accounting?
Financial accounting is a branch of accounting that is concerned with the summarizing, recording and reporting of financial transactions that take place in a business concern over a time period.
Financial accounting is used for the preparation of various financial statements that can be used by companies to showcase their financial performance to the various users of financial information like creditors, investors, customers and suppliers etc.
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This article is a ready reckoner for all the students to learn the difference between cost accounting and financial accounting:
Difference Between Cost Accounting And Financial Accounting
| Cost Accounting | Financial Accounting |
| Definition | |
| Cost accounting is referred to as a form of managerial accounting that is used by businesses to classify, summarize and analyse the different costs with the purpose of cost control and cost reduction and thereby helping management in making better decisions. | Financial accounting is a branch of accounting that is concerned with the summarizing, recording and reporting of financial transactions that take place in a business concern over a time period. |
| Type of Information documented | |
| Documents the data associated with the labour and material which are utilised in the manufacturing procedure. | Documents the data that are in monetary terms. |
| Estimation of Stock | |
| Stock value is estimated at cost | Stock value is estimated based on the lesser value between net realisable value or Cost |
| Analysis of Profit | |
| Normally, the gains are investigated for a specified job, batch, product and procedure | Profits, Income and expenditure are investigated together for a specific period of the entire trading concern |
| Primary Objective | |
| Controlling and reducing cost | Towards maintaining the complete record of the financial transactions |
Top 5 Objectives of Cost Accounting
Cost accounting is a tool that can determine the accounting and costing methods and procedures to the ascertain the cost. Few objectives are mentioned below:
- To determine per unit cost of various goods produced by a business
- To present an accurate report of both operation and process cost
- To indicate and prepares a report for the wastage costs in terms of raw material, time or money used in machinery
- To provide important data and guidelines for determining the cost of manufactured goods or services rendered
- To understand the profitability of every commodity produced and inform management about how profits can be maximised