The difference between cost accounting and management accounting is very crucial as the users of both the accounting system are the internal management of the organization. So, it is sometimes believed that they are one and the same thing, but they are quite different from each other in many areas. If we talk about cost accounting, it has a quantitative approach, but the management accounting gives emphasis on both quantitative and qualitative data. So, take a read of the article provided to you which explain the difference between the two in tabular form.
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Definition of Cost Accounting
Cost Accounting is a method of collecting, recording, classifying and analysing the information related to cost. The information provided by it is helpful in the decision-making process of managers. There are three major elements of cost which are material (direct & indirect), labour (direct & indirect) and overhead (Production, Office & Administration, Selling & Distribution, etc.).
The main aim of the cost accounting is to track the cost of production and fixed costs of the company. This information is useful in reducing and controlling various costs. It is very similar to financial accounting, but it is not reported at the end of the financial year.
Definition of Management Accounting
Management Accounting refers to the preparation of financial and non-financial information for the use of management of the company. It is also termed as managerial accounting. The information provided by it is helpful in making policies and strategies, budgeting, forecasting plans, making comparisons and evaluating the performance of the management.
The reports produced by management accounting are used by the internal management (managers and employees) of the organisation, and so they are not reported at the end of the financial year.
Key Differences Between Cost Accounting and Management Accounting:
- The accounting related to the recording and analysing of cost data is cost accounting. The accounting related to the producing information which is used by management of the company is management accounting.
- Cost Accounting provides quantitative information only. On the contrary Management Accounting provides both quantitative and qualitative information.
- Cost accounting is part of Management Accounting as the information is used by the management for making decisions.
- The primary objective of Cost Accounting is the ascertainment of cost of producing a product, but the main object of the management accounting is to provide information to managers for setting goals and future activity.
- There are specific rules and procedure for preparing cost accounting information while there is no specific rules and procedures in case of management accounting information.
- The scope of Cost Accounting is limited to cost data however the Management Accounting has a wider area of operation like tax, budgeting, planning and forecasting, analysis, etc.
- Cost Accounting is related to ascertainment, allocation, distribution and accounting face of cost. On the flip side, management accounting is associated with impact and effect aspect of cost.
- Cost Accounting stresses on short-range planning, but management accounting focuses on long and short range planning, for which it uses high level techniques such as probability structure, sensitive analysis etc.
- While management accounting can’t be installed in the absence of accounting, cost accounting has no such requirement, it can be installed without management accounting.
- Branch of Accounting
- Helpful in decision-making
- Prepared for a particular period.
- Not reported at the end of the financial year.
Both the cost accounting and management accounting are a part of accounting. They are helpful in for ensuring the smooth and efficient running of the business. On the basis of the information provided by the two entities various analysis are conducted. Cost accounting aims at reducing extra expenditure, eliminating unnecessary costs and controlling various costs. On the other hand management accounting aims at the planning of policies, strategy formulation setting goals, etc.