Differences between Cost Accounting and Management Accounting
There are a lot of branches in Accounting. Cost accounting and management accounting are just one of them. Management Accounting and Cost Accounting provide management with valuable information on decision-making.
Cost and management accounting work together can keep management well informed about what is going on in the business and what changes, if any, need to be made. Sometimes they seem to be interrelated, but there are considerable differences between them.
The differences between cost accounting and management accounting are as follows:
1. Definition
Cost accounting is a process in which costs are collected, recorded, classified, analyzed, and allocated to determine and control costs, while through the use of financial information, management accounting decides matters within their organizations, enabling them to better manage and perform control functions.
2. Objective
The primary objective of cost accounting is to determine a product’s cost and control the cost, while planning and decision-making through the use of information is the primary objective of management accounting.
3. Used Data
In cost accounting, only financial or quantitative data is considered, while both financial and non-financial data are used in management accounting for decision-making.
4. Nature
Cost accounting deals with past and present facts and figures, while management accounting forecasting and taking future decisions on the basis of past and current cost data.
5. Concentration
In a complex business environment, cost accounting focuses on cost ascertainment and cost control, while Management Accounting focuses on company decision-making in a larger picture.
6. User of the Information
Cost accounting provides information for decision-making to both internal and external users, while management accounting provides information to individuals within an organization.
7. Reports
For the management as well as the shareholders and creditors of a corporation, cost accounting reports are valuable, while management accounting prepares reports intended specifically for management.
8. Principles
There are only principles of cost accounting used in it, while in management accounting, the main principles of cost accounting and financial accounting are used.
9. Statutory Requirement
In certain cases, statutory auditing of cost accounting reports is important, particularly for large enterprises, while no statutory audit requirement for reports is required in management accounting.
10. Success
The success of cost accounting is not based on the method of management accounting while Management accounting performance relies on a company’s sound financial accounting system and cost accounting systems.
Since both cost accounting and management accounting are helpful for the purposes of planning control and decision-making, we can collectively tell them as cost and management accounting. In fact, management accounting uses the forecast of cost information for decision making in the future.
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