Distinguish between cost accounting and financial accounting.

Management Accounting Block Revision Mock Exams

Cost account and financial accounting distinction:

Users: Cost accounting statements are used by internal users (the Management) for planning, control and decision making purposes. Financial accounting statements are used by external users (especially shareholders and the government.)

Orientation: Financial accounting reports past information as it is based on historical accounting concepts. Cost accounting is future oriented as it provides information to be used for planning, controlling and decision making by the organizations managers.

Regulation: Financial accounting is regulated by the accounting standards (also called the generally accepted accounting practices) while cost accounting is not.

Reporting Period: Financial accounts are prepared for fixed periods usually
annually while cost accounts are prepared as need arises.

Scope: Financial accounting covers only the financial aspects of an organization. Cost accounting covers financial as well as other organizational aspects such as management etc.

Presentation Format: There is no fixed forward for cost accounting information.
It is presented in the manager‟s preferred format. Financial accounting information is prepared using fixed formats.

Auditing requirements: Cost accounting information is not subjected to external or internal audits while accounting information is.

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