Cost Accounting vs Financial Accounting

Both cost accounting and financial accounting are the parts of accounting. Both provide useful information to the businessman for decision making. Both can be used for reducing cost and increasing the profit and wealth of business. But there are lots of differences between cost accounting and financial accounting. Financial accounting provides the information of expenses on the basis of historical transactions. In cost accounting, we show the detailed information of expenses.
For example: We have 5 products. Financial accounting's income statement will show just the total material cost, direct expenses, indirect expenses, sale and net profit but it will not show the each product's material cost, labour cost, overhead cost, sale and net profit. All these information can be obtained through cost accounting.

Now, we are explaining the differences between cost accounting and financial accounting.

1. Meaning 

Cost Accounting : Cost accounting is that part of accounting which is helpful to calculate the cost and control the cost. In cost accounting, we deeply study the variable cost, fixed cost, overheads and capital cost.

Financial Accounting : Financial Accounting is that part of accounting in which we record the transactions and we make the financial statements. Through making the financial statement, it provide information of profitability and financial position to the interested parties.

2. Objective

Cost Accounting : We can not take all decisions on the basis of information which have been provided by financial accounting. After making the financial statements under financial accounting, we calculate the cost of each unit and use the techniques of cost accounting for better decision making.

Financial Accounting : Main objective of financial accounting is to show the financial statement correctly.

3. Law 

Cost Accounting : There is not any restriction on the cost accounts. It can be made according to the need of company but some company must audit their cost accounts under cost audit.

Financial Accounting : In financial accounting, there are lots of law restrictions. For example, company accounts and financial statements must be according to the format of company law. It should also follow the rules of IFRS and income tax law.

4. Controlling 

Cost Accounting : In cost accounting, we study the techniques of controlling the cost. All the costs are calculated for the purpose of controlling the cost. For example, Company produces product A, B and C. If product C is generating 30% but product A and B is generating just 5%. We will try to control the cost of A and B product through different techniques of cost control.

Financial Accounting : In financial accounting, we just record the transactions correctly. We do not care to control the cost.

5. Profit Analysis

Cost Accounting : In cost accounting, to find the profit per job or per batch or per service unit  is possible.

Financial Accounting : In financial accounting. we make the income statement which shows the net profit or loss or whole organisation not one job or batch.

6. Record 

Cost Accounting : In cost accounting, both actual transactions record and estimations are used. For example budgetary control and variance analysis, we set the standard cost which is based on the estimations. These estimations may be differ from actual cost.

Financial Accounting : In financial accounting, we use actual transaction for recording purpose. We do not use the estimation for preparing income statements and balance sheet.

7. Valuation of Inventory

Cost Accounting : In cost accounting, inventory's valuation will be on cost.

Financial Accounting : In financial accounting, inventory's valuation will be on the cost or  market value which will be low.

8. Cycle 

Cost Accounting : In cost accounting, we first calculate the raw material cost. Then, we calculate the labour cost. Then, we calculate the direct material cost. After this, we calculate the overhead cost. All these cost are added. A profit margin is added. An estimated sale price is calculated. Its whole controlling cycle will be relating to control the cost of raw material, labour cost and overheads.

Financial Accounting : In financial accounting, we pass the journal entries. Then, we make the ledger accounts. Then, we prepare the trial balance. Then, we make the final accounts.

COMMENTS

Comments on this Website: 4
Loading...
.
Share above Content to Your Friends



Name

access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting interest international Internet Introduction of Tally 9 inventory investment invoice IT Japan Job costing journal entries Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting otcei pakistan parents pay pal pdf pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching wikipedia working capital youtube
false
ltr
item
Accounting Education: Cost Accounting vs Financial Accounting
Cost Accounting vs Financial Accounting
http://1.bp.blogspot.com/-EBEsu-MSg_g/VKI0jNm3jQI/AAAAAAAAQzY/A3qPHSKAjjo/s1600/ca.PNG
http://1.bp.blogspot.com/-EBEsu-MSg_g/VKI0jNm3jQI/AAAAAAAAQzY/A3qPHSKAjjo/s72-c/ca.PNG
Accounting Education
http://www.svtuition.org/2012/09/cost-accounting-vs-financial-accounting.html
http://www.svtuition.org/
http://www.svtuition.org/
http://www.svtuition.org/2012/09/cost-accounting-vs-financial-accounting.html
true
2410664366776677676
UTF-8
Not found any lecture VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at vinod@svtuition.org for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock