What Is The Difference Between Cost Accounting And Management Accounting?

Managing finances is something that every organization needs to be concerned about.  In this respect, the primary thing that you need to know is the difference between cost accounting and management accounting. To be very precise, cost accounting is based on both quantitative and cost standpoints. It is a necessity for all the organizations in the world. Likewise, management accounting is also mandatory for any business organization in terms of decision-making.

So what is the difference between cost accounting and management accounting? Keep an eye out on the next sections to get the answer in detail about cost accounting vs financial accounting.

What Is Cost Accounting? What Are Its Features?

The first step to understanding the difference between cost accounting and management accounting is getting clarity on cost accounting. You often may come across the question “ Cost management accounting Define. ” So what is the cost accounting definition actually? It is a systematic process for documenting and reporting measurements of the cost for creating products and providing services. The entire system stands on two principles – Aggregate and Detail. Wanna learn some key features of cost accounting? Let’s go.

• The primary characteristic of cost accounting is that it deals with the price of services and products.
• The cost accounting data applies to establish the expenses and budgets.
• This cost accounting information is again applicable to analyze if a company-adapted procedure is efficient or not.
• This recorded costing data assists management in budget formulation.
• Furthermore, the cost accounting budget allows the accounting experts to make important financial decisions for the company.

What Is Management Accounting? What Are Its Features?

The next variable that we would talk about to assess the difference between cost accounting and management accounting is “ managerial accounting. ” It’s the technique of finding, measuring, evaluating, interpreting, and conveying financial information to managers for achieving an organization’s objectives. Below are the core characteristics of management accounting:

• Management accounting is a broad term referring to several accounting practices aimed at increasing the information quality concerning company KPIs.
• Managerial accountants make judgments based on data on the cost and income of the company’s goods and services.
• Managerial accounting revolves around various accounting dimensions like budgeting, forecasting, financial analysis, product costing, etc.
• Objectivity is another predominating feature in management accounting.

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Difference Between Cost Accounting And Management Accounting At A Glance

I hope you have understood from the above two sections that cost and management accounting are different from each other in several respects. The comparative analysis table below entails the difference between cost accounting and management accounting. Take a look at each and every point of this table to get a vivid picture of cost accounting vs managerial accounting:

Frequently Asked Questions (FAQ):

Q1. What Is The Difference Between Cost Accounting And Management Accounting?

The main difference between cost accounting and management accounting lies in the nature of functionality. Cost Accounting is concerned with gathering and analyzing cost-related data, which provides quantitative information to users. On the contrary, management accounting sheds light on the development of both non-financial and financial data.

Q2. What Is The Relationship Between Cost Accounting And Management Accounting?

Apart from the difference between cost accounting and management accounting, these two are deeply interconnected to one another. Hence, altogether, it’s called cost management accounting.

The relationship between cost accounting and management accounting is that the former creates a base for the latter. Specifically, cost accounting facilitates collecting data that management accounting tools utilize while making financial decisions.

Q3. When Factory Wages Payable Costs For Labor Are Allocated In A Job Cost Accounting System:

The right answer is: Work in Process Inventory and Factory Overhead are debited, and Factory Wages Payable is credited.

Q4. Managerial Accounting Information Includes Both Historical And Estimated Data. Is It True Or False?

The question here is to determine whether “ managerial accounting information includes both historical and estimated data. ” is true. The answer is – Yes, this statement is true. Managerial accounting deals with both historical as well as estimated data.

Wrapping It Up

The difference between cost accounting and management accounting is something you need to understand in greater depth. If you are a new business person or have just opened your startup then you need to have a clear concept of cost management accounting. Do you have any further doubts regarding cost accounting vs financial accounting? If yes, then shoot them in the comment area below. We will be answering all your queries as soon as possible.

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