Financial Accounting | Cost Accounting | Management Accounting | |
Meaning | Preparation of financial statements of an organization to provide the financial information to the interested parties. | Keeps track of various costs incurred in production activities | Provides relevant information to the managers to make policies, plans and strategies for running the business effectively. |
Information type | Monetary transactions | Material, labour and overhead | |
Objective | To determine the cost of production and control the cost | To assist the management by supplying necessary accounting information | |
Scope | Not broad, deals primarily with cost | Broad | |
Purpose | Prepare profit & loss account and balance sheet for reporting to owners or shareholders or outside agencies | To provide detailed cost information to management – internal users | |
Nature | Only historical data | Past as well as present facts and predetermined figures | Relating to the future. |
Statutory requirements | Should be prepared according to the legal requirements of Companies Act and Income Tax Act. | Voluntary except in certain industries. | Not compulsory |
Format | Specified | Not specified | |
Accounting principle | GAAP | No such principle | |
Reveals profit and loss of the business as a whole – does not show figures of cost and profit for individual products or departments. | Shows detailed cost and profit data for each product line or department etc. | ||
Periodicity | Periodical process – usually annually. | Continuous process – may be daily, weekly, monthly etc. | As per the needs |
User | Internal and external | Internal | Only internal |
Control aspect | No control function – only recording and reporting | Involves controlling aspects. | |
Concerned with only historical records | Concerned with historical as well as current data | ||
Types of transactions | Only external transactions | External as well as internal | |
Types of statements prepared | P&L account, balance sheet etc | Idle time report, variance report etc. | |
Performance measurement | Measures the overall performance of organization | Performance of various departments and divisions | |
Publishing and auditing | Required to be published and audited | Neither published nor audited |
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