Cost accounting is the process of recording, classifying, allocating and reporting costs to provide information to managers. It determines unit costs to help set prices and control costs. Management uses cost information to make production policy decisions. Managerial accounting provides internal data for management while financial accounting provides external data for outsiders. Both use the same accounting principles but differ in purpose and scope. Cost accounting controls costs through standard costing and budgeting.

2.  “Cost accounting is the process of recording,
classifying, allocating and reporting the various
costs incurred in the operation of an enterprise”.
 In simple words costing is a systematic procedure
for determining the unit cost of output produced or
service rendered.

3.  It is not sufficient for management to know that the
cost of shirt is Rs. 15. The management is also
interested in knowing the amount spent for cloth in
shirt, the amount of labor and other expenses so that
it can control and reduce its cost.

4.  Managerial accounting is concerned with providing
information to managers that is people inside an
organization who direct and control its operations.
 In contrast, financial accounting is concerned with
providing information to stockholders, creditors and
others who are outside an organization.

5.  Managerial accounting provides the essential data
that are needed to run organizations.
 Financial accounting provides the essential data that
are used by outsiders to judge a company’s past
financial performance.

6. The main objectives of costing are
1) To ascertain the cost of products/services
2) To determine selling price
3) To control cost
4) To provide guidelines for management policy

7. Costing system has following advantages.
1) Profitable and unprofitable activities are disclosed.
2) Costing provides such information upon which estimates
and tenders may be based.
3) The exact cause of a decrease or an increase in the profit
or loss of business can be located.
4) Costing guides future production policies
5) It helps in controlling the cost with the application of
standard costing and budgetary control. Cost comparison
also helps in cost control.

8.  The function of accounting is to provide the
financial information for different parties who are
interested. Both financial and cost accounting are
concerned with the accumulation and presentation
of information to serve the needs of management
and outsiders. The source of two accounts for
recording the transactions is the same. Cost
accounting is based on the same principles
regarding the debit and credit as are applied in
financial accounting. Both are in monetary terms.
Both differ in their purpose and scope.

9. PURPOSE:
Cost accounting renders information
for the guidance of the management for
planning, operation, control and decision
making.
FORMS AND ACCOUNTS:
Financial accounting
must follow GAAP but cost accounts on the
other hand, are voluntarily kept to serve the
management in the discharge of its functions.
Recently the companies act has made
obligatory the keeping of costing records in
some manufacturing companies.

10.  CONTROL:
Financial accounting lays emphasis on
the recording aspect, no consideration is given to
control aspect . Cost accounting provides a detailed
system of control with the help of standard costing
and budgetary control.

11.  Cost accounting is effective tool for management.
Management accounting is also designed to serve the
needs of management in the performance of its
functions. The ICMA defines management accounting
as the presentation of accounting information is such a
way so as to assist management in the creation of policy
and in day to day operation of an undertaking. Thus
management accounting aims at reporting to
management for planning, decision making, controlling
and other managerial function.

12.  Objectives of cost accounting are quite similar to those
of management accounting. In fact cost management
accounting is an extension of cost accounting.
 For example: cost accountant reports to management the
variances from standard or budgeted cost and presents a
comparative data of various periods. The management
accountant on the other hand goes a step further to
suggest ways and means to improve upon the operations
on the basis of available data of variance. In case
material cost is more, the management accountant
would work out the prospects of controlling the material
cost and bring it to the level of standard material cost.

13.  Financial accounting prepare income
statement and
balance sheet
 Cost accounting analyzing cost for
control and maximizing
efficiency
 Management assisting management
accounting for planning, decision
making and control.