0The upcoming discussion will update you about the differences between cost accounting and financial accounting.
Difference # Cost Accounting:
1. Cost accounting is an internal reporting system for an organization’s own management for decision making etc.
2. Cost accounting is more concerned with short-term planning and its reporting period is much lesser than Financial Accounting.
3. Cost accounting not only deals with historic data but also futuristic in approach.
4. Cost Accounting System cannot be installed without proper Financial Accounting System.
5. In Cost Accounting, the major emphasis on functions, activities, products, processes and on internal planning and control and information needs of the organization.
6. Each organization can develop a Costing System best suited to its individual needs.
7. Cost accounting primarily emphasizes on cost and it deals with collection, analysis, relevance, interpretation and presentation for managerial decision making on various business problems. It is concerned more with the ascertainment, allocation, distribution and accounting aspects of costs.
8. Cost accounting uses with both monetary, as well as nonmonetary (quantitative) information.
9. Cost accounting provides a detailed system of cost control with the help of standards and budgets.
10. The items of costs are analyzed, classified in order to ascertain the cost per unit of product or service.
Difference # Financial Accounting:
1. Financial accounting is more attached with reporting the results and position of business to persons and authorities other than management like government, creditors, investors, owners etc.
2. The periodicity of reporting in Financial Accounting is much wider.
3. The Financial Accounting data is historical in nature.
4. Financial Accounting System can be installed without proper Cost Accounting System.
5. In Financial Accounting, the major emphasis is in cost classification based on type of transactions e.g., salaries, repairs, insurance stores etc.
6. Financial accounting classifies an entity’s transactions in money terms, in accordance with established concepts, principles, accounting standards and legal requirements.
7. Financial accounting aims to present ‘true and fair view’ of overall results of the transactions and events for the enterprise as a whole. It does not trace the path of the events within the enterprise. The financial statements like profit and account, balance sheet and flow statement – reveal the overall performance and position of the enterprise.
8. Monetary information is only used in Financial Accounting.
9. Financial accounting emphasises only on recording of transactions and presentation of data in the form of financial statements. It does not give importance to control aspect.
10. The items of costs are expressed in totals.