Difference Between Cost Accounting And Financial Accounting
The main dissimilarities or difference between cost and financial accounting can be pointed out as follows:
1. Meaning
Cost Accounting: It is a process of collecting, analyzing and presenting detailed cost information about various costs such as product cost, unit cost, process cost etc.
Financial Accounting: It is a process of identifying, classifying, summarizing and recording financial transaction and preparing financial statements at the end of the period.
2. Objectives
Cost Accounting: To provide detailed cost information regarding products, units, process, department. It helps to improve operational efficiency.
Financial Accounting: To ascertain operational results (profit or loss) and reveal the financial position of the firm.
3. Users/Audience
Cost Accounting: Its information is used by the internal users such as managers, directors employees etc.
Financial Accounting: It provides information for both internal (management and employees) and external users (shareholders, government authorities, creditors, customers etc).
4. Format/Procedure
Cost Accounting: It does not follow specific procedure and format to maintain records. It is not guided by specific principle.
Financial Accounting: It strictly follows certain procedure and format to keep financial records. it is guided by specific principles.
5. Scope
Cost Accounting: Narrow scope
Financial Accounting: Wide scope
6. Cost Controlling
Cost Accounting: It uses different techniques to control operational costs.
Financial Accounting: It does not apply cost controlling methods and techniques.
7. Based On
Cost Accounting: It is based on estimation
Financial Accounting: It is based on actual data.
8. Focus
Cost Accounting: Focus on internal aspects of business such as cost control, cost reduction, effective utilization of resources etc.
Financial Accounting: It focuses on both internal and external aspects of business firm.
Also Read:
Also Read:
9. Reporting Period
Cost Accounting: It provides report as per the need and requirement of the management.
Financial Accounting: It provides report only at the end of the accounting period.
10. Mandatory
Cost Accounting: It is mandatory only for manufacturing companies and firms.
Financial Management: It is mandatory for all types of business organizations.
Cost Accounting Vs Financial Accounting (Comparison Chart)
I hope this post is helpful to understand the difference between cost accounting and financial accounting and to make comparison between them.
Cost Accounting Vs Financial Accounting (Comparison Chart)
Basis For Difference
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Cost Accounting
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Financial Accounting
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Introduction
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Collecting, analyzing and presenting cost information about products, process, units etc.
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Identifying, collecting, summarizing and recording of financial transactions of the business
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Purpose
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Providing cost information
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To show the financial position of the firm
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Users
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Internal users
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Both internal and external users
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Guided By Specific Principle ?
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No
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Yes
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Scope
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Limited
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Wider
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Cost Control Technique
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Applies cost controlling techniques
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Does not apply
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Based On
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Estimation
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Actual Data
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Focus On
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Internal aspects of the business
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Both internal and external aspects
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Reporting
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According to the need of the management
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At the end of the period
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Mandatory
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For manufacturing firms
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For all types of firms
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I hope this post is helpful to understand the difference between cost accounting and financial accounting and to make comparison between them.
