presentation on cost accounting

1. COST AND MANAGEMENT
ACCOUNTING
SEMINAR
By,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Alex Joseph
Roll No. 02
Phoenix, MACFAST

2. FINANCIAL ACCOUNTING VS.
COST ACCOUNTING
An executive summary
 Cost accounting is a branch of accounting and
has been developed due to the limitations of
financial accounting
Financial accounting is primarily concerned
with the preparation of profit and loss account
and balance sheet. But cost accounting analysis
the operating efficiency of the divisions.
Profitable and unprofitable activities are
disclosed

3. FINANCIAL ACCOUNTING VS.
COST ACCOUNTING
Both financial and cost accounting are the
branches of accounting whose main object is
to provide information by recording the
business transactions systematically and
scientifically so that it may serve the purpose
of the both the management for policy
formulation controlling and to provide
necessary protection to the outsiders.

4. DIFFERENCES BETWEEN FINANCIAL
ACCOUNTING AND COST ACCOUNTING
1. Purpose
 Financial accounting provides information
about the business on a general way it tells
about the profit and loss and financial
position of the business to the owners and
other outside parties.
 Cost accounting provides information to
management.

5. DIFFERENCES BETWEEN FINANCIAL
ACCOUNTING AND COST ACCOUNTING
2. Forms for Accounts
Financial accounts are kept in such a way as to
meet the requirements of Companies Act and
Income Tax Act.
Cost accounts are generally kept voluntarily to
meet the requirements of management. But
now Companies Act has made it obligatory to
keep cost records in some manufacturing
industries.

6. DIFFERENCES BETWEEN FINANCIAL
ACCOUNTING AND COST ACCOUNTING
3. Recording
Financial accounting classifies, records and
analyses the transactions in a subjective
manner that is according to the nature of the
expenses.
Cost accounting records the expenditure in an
objective manner that is according to the
purposes for which the costs are incurred.

7. DIFFERENCES BETWEEN FINANCIAL
ACCOUNTING AND COST ACCOUNTING
4. Control
Financial accounting lays on emphasis on the
recording aspect without attaching any
importance to the control.
Cost accounting provides a detailed system of
control for materials, labour and overhead
costs with the help of standard costing and
budgetary control.

8. DIFFERENCES BETWEEN FINANCIAL
ACCOUNTING AND COST ACCOUNTING
5. Periodicity of Reporting
Financial accounting reports operating results
and financial position usually at the end of the
year.
It gives information through cost reports to
management as and when desired.

9. DIFFERENCES BETWEEN FINANCIAL
ACCOUNTING AND COST ACCOUNTING
6. Analysis of Profit
Financial accounts are the accounts of the
whole business. They are independent in
nature and disclose the net profit or loss of
the business as a whole.
Cost accounting is only a part of the financial
accounts and discloses profit or loss of each
product, job or service.

10. DIFFERENCES BETWEEN FINANCIAL
ACCOUNTING AND COST ACCOUNTING
7. Reporting of costs
The cost are reported in aggregate in financial
accounts.
The costs are broken down on a unit basis in
cost accounts.

11. DIFFERENCES BETWEEN FINANCIAL
ACCOUNTING AND COST ACCOUNTING
8. Nature of Transactions
 Financial accounts are relate to commercial
transactions of the business and include all
expenses. Financial accounts are concerned with
external transactions.
 Cost accounts relate to transactions connected
with the manufacture of goods and services and
include only those expenses which enter into
production. It concerned with the internal
transactions which do not form the basis of
payment or receipt of cash.

12. DIFFERENCES BETWEEN FINANCIAL
ACCOUNTING AND COST ACCOUNTING
9. Information
Monetary information is only used . That is
only monetary transactions are recorded.
In cost accounting monetary and non-
monetary information are also used.

13. DIFFERENCES BETWEEN FINANCIAL
ACCOUNTING AND COST ACCOUNTING
10. Fixation of Selling Price
Financial accounts are not maintained with
the object of fixing selling prices.
Cost accounting provides sufficient data for
fixation of selling prices.

14. DIFFERENCES BETWEEN FINANCIAL
ACCOUNTING AND COST ACCOUNTING
11. Figures
Financial accounts deals with actual facts and
figures.
Cost accounts deals with partly with facts and
figures and partly with estimates.

15. DIFFERENCES BETWEEN FINANCIAL
ACCOUNTING AND COST ACCOUNTING
12. Reference
In devising or operating a system of financial
accounting can be made in case of difficulty to
the company law, case decisions and to the
canons of sound practice.
No such reference is possible. Guidance can
be had only from a body of conventions
followed by cost accountants.

16. DIFFERENCES BETWEEN FINANCIAL
ACCOUNTING AND COST ACCOUNTING
13. Relative Efficiency
Financial accounts do not provide information
on the relative efficiencies of various workers,
plants and machinery.
Cost accounts provide valuable information on
the relative efficiencies of various workers,
plants and machinery.

17. DIFFERENCES BETWEEN FINANCIAL
ACCOUNTING AND COST ACCOUNTING
14. Stock Valuation
In financial accounting stocks are valued at
cost or market price whichever is less.
In cost accounting stocks are valued at cost.

18. DIFFERENCES BETWEEN FINANCIAL
ACCOUNTING AND COST ACCOUNTING
15.Types of Science
 Financial accounting is a positive science
because it is subject to legal rigidity with
regard to the preparation of the financial
statements.
 Cost accounting is not only a positive science
but also a normative science, because it
includes technique of budgetary control and
standard costing.

19. Basis of differences Financial Accounting Cost Accounting
1. Purpose Tells about the profit and Information to managers for
loss and financial position of planning, operating, control,
business- General view. and decision making.
2. Form of Accounting Meets the requirements of To meet the requirements of the
the Companies Act and managers
Income Tax Act
3. Recording Records the data in a Records the data in an objective
subjective manner manner ( according to the
(according to the nature of purpose which the cost are
expenses) incurred)
4. Control Not giving emphasis on the It provide detailed system of
control control
5. Periodicity of Reporting Usually at the end of the Provides information as and
period when it is desired by the
managers
6. Analysis of Profit Disclose the net profit and It discloses the profit and loss of
loss of the business as a each product, job or services
whole

20. 7. Reporting of Cost Reported in aggregate in The cost are broken down on a
financial accounting unit basis
8. Nature of Transaction Relate to the commercial Relate to the manufacture of
transaction of the business goods and services
9. Information Monetary information are Non-monetary information are
used also used
10. Fixation of selling price Do not maintained with the Provides sufficient data for
object of fixing price pricing
11. Figures Deals mainly with actual Deals partly with facts and
figures and facts figures partly with estimates
12. Reference Reference can be made in No such reference is possible
case of difficulty to the
company law
13. Relative Efficiency Does not provide the It provides the relative
relative efficiencies of the efficiency of the various
workers, plant and workers, plants and machinery
machinery
14. Stock of Valuation Stock are valued at cost or Stock are valued at cost
market price which ever is
less
15. Types of Science It is a positive science It is not only a positive science