This document compares financial accounting and cost accounting. Financial accounting prepares financial statements like the profit and loss statement and balance sheet for external stakeholders like owners and regulators. It focuses on historical records and external transactions. Cost accounting provides detailed internal reporting to management on costs, profits, and performance. It analyzes costs and profits at different levels like products, departments and processes. Cost accounting focuses on both historical records and predetermined future costs using techniques like standard costing and budgeting to help management control costs. It considers both external and internal transactions.

1. FINANCIAL ACCOUNTING
AND COST ACCOUNTING
Vinita Kale
MIT School of Management, Pune

2. DIFFERENCE BETWEEN
FINANCIAL ACCOUNTING AND
COST ACCOUNTING
Financial Accounting Cost Accounting
 Purpose- Its main
purpose is to prepare
profit & loss account
& balance sheet for
reporting to owners or
shareholders & other
outside agencies
i.e. external users
 The main purpose of
cost accounting is to
provide detailed cost
information to
management i.e.
internal users

3. STATUTORY REQUIREMENTS
 These accounts have
to be prepared
according to the legal
requirement of
Companies Act
&Income Tax Act.
 Maintenance of these
accounts is voluntary
except in certain
industries where it
has been made
obligatory to keep cost
records under
Companies Act.

4. ANALYSIS OF COST & PROFIT
 Financial accounts
reveal the profit &
loss of the business as
a whole for a
particular period. It
does not show the
figures of cost & profit
for individual
products, departments
& process.
 Cost accounts show
the detailed cost &
profit data for each
product line ,
department, process
etc.

5. PERIODICITY OF REPORTING
 Financial reports are
prepared periodically,
usually on as annual
basis.
 Cost report is a
continuous process
and may be
daily,weekly,monthly,
etc.

6. CONTROL ASPECT
 It lays emphasis on
the recording of
financial transactions
and does not attach
any importance to
control aspect.
 It provides for a
detailed system of
control with the help
of certain special
techniques like
standard costing and
budgetary control.

7. HISTORICAL & PREDETERMINED
COSTS
 It is concerned almost
exclusively with
historical records .The
historical nature of
financial accounting can
be easily understood in
the context of purposes
for which it was
designed.
 It is concerned not only
with historical records
but also with
predetermined costs.
This is because cost
accounting does not end
with what has
happened in the past &
extends to plans &
policies to improve
performance in the
future.

8. TYPES OF TRANSACTIONS
RECORDED
 FA records only
external transactions
like sales , purchases ,
receipts,etc .with
outside parties.
 CA not only records
external transactions
but also internal or
inter-departmental
transactions like issue
of materials by store
keeper to production
department.

9. TYPES OF STATEMENTS PREPARED
 Financial accounting
prepares general
purpose statement like
P& L account & B.S.
That is to say, financial
accounting must
produce information
that is used by many
classes of people ,none of
whom have explicitly
defined informational
needs.
 Cost accounting
generates special
purpose statements &
reports like reports on
Loss of materials,
Variance report, idle
time report, etc.
Cost accounting
identifies the user,
discusses his problems
and need & provides
information.

10. ANY QUESTIONS ???

11. THANKING YOU !!!