1. COST AND MANAGEMENT ACCOUNTING SEMINARBy,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, Alex JosephRoll No. 02 Phoenix, MACFAST

2. FINANCIAL ACCOUNTING VS. COST ACCOUNTINGAn executive summary Cost accounting is a branch of accounting and has been developed due to the limitations of financial accountingFinancial 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 ACCOUNTINGBoth 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 FINANCIALACCOUNTING AND COST ACCOUNTING1. 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 FINANCIALACCOUNTING AND COST ACCOUNTING2. Forms for AccountsFinancial accounts are kept in such a way as tomeet the requirements of Companies Act andIncome Tax Act.Cost accounts are generally kept voluntarily tomeet the requirements of management. Butnow Companies Act has made it obligatory tokeep cost records in some manufacturingindustries. 6. DIFFERENCES BETWEEN FINANCIALACCOUNTING AND COST ACCOUNTING3. RecordingFinancial accounting classifies, records andanalyses the transactions in a subjectivemanner that is according to the nature of theexpenses.Cost accounting records the expenditure in anobjective manner that is according to thepurposes for which the costs are incurred. 7. DIFFERENCES BETWEEN FINANCIALACCOUNTING AND COST ACCOUNTING4. ControlFinancial accounting lays on emphasis on therecording aspect without attaching anyimportance to the control.Cost accounting provides a detailed system ofcontrol for materials, labour and overheadcosts with the help of standard costing andbudgetary control. 8. DIFFERENCES BETWEEN FINANCIALACCOUNTING AND COST ACCOUNTING5. Periodicity of ReportingFinancial accounting reports operating resultsand financial position usually at the end of theyear.It gives information through cost reports tomanagement as and when desired. 9. DIFFERENCES BETWEEN FINANCIALACCOUNTING AND COST ACCOUNTING6. Analysis of ProfitFinancial accounts are the accounts of thewhole business. They are independent innature and disclose the net profit or loss ofthe business as a whole.Cost accounting is only a part of the financialaccounts and discloses profit or loss of eachproduct, job or service. 10. DIFFERENCES BETWEEN FINANCIALACCOUNTING AND COST ACCOUNTING7. Reporting of costsThe cost are reported in aggregate in financialaccounts.The costs are broken down on a unit basis incost accounts. 11. DIFFERENCES BETWEEN FINANCIALACCOUNTING AND COST ACCOUNTING8. 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 FINANCIALACCOUNTING AND COST ACCOUNTING9. InformationMonetary information is only used . That isonly monetary transactions are recorded.In cost accounting monetary and non-monetary information are also used. 13. DIFFERENCES BETWEEN FINANCIALACCOUNTING AND COST ACCOUNTING10. Fixation of Selling PriceFinancial accounts are not maintained withthe object of fixing selling prices.Cost accounting provides sufficient data forfixation of selling prices. 14. DIFFERENCES BETWEEN FINANCIALACCOUNTING AND COST ACCOUNTING11. FiguresFinancial accounts deals with actual facts andfigures.Cost accounts deals with partly with facts andfigures and partly with estimates. 15. DIFFERENCES BETWEEN FINANCIALACCOUNTING AND COST ACCOUNTING12. ReferenceIn devising or operating a system of financialaccounting can be made in case of difficulty tothe company law, case decisions and to thecanons of sound practice.No such reference is possible. Guidance canbe had only from a body of conventionsfollowed by cost accountants. 16. DIFFERENCES BETWEEN FINANCIALACCOUNTING AND COST ACCOUNTING13. Relative EfficiencyFinancial accounts do not provide informationon the relative efficiencies of various workers,plants and machinery.Cost accounts provide valuable information onthe relative efficiencies of various workers,plants and machinery. 17. DIFFERENCES BETWEEN FINANCIALACCOUNTING AND COST ACCOUNTING14. Stock ValuationIn financial accounting stocks are valued atcost or market price whichever is less.In cost accounting stocks are valued at cost. 18. DIFFERENCES BETWEEN FINANCIALACCOUNTING AND COST ACCOUNTING15.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 differencesFinancial AccountingCost Accounting1. PurposeTells about the profit and Information to managers forloss and financial position of planning, operating, control,business- General view.and decision making.2. Form of Accounting Meets the requirements ofTo meet the requirements of thethe Companies Act andmanagersIncome Tax Act3. RecordingRecords the data in aRecords the data in an objectivesubjective mannermanner ( according to the(according to the nature ofpurpose which the cost areexpenses)incurred)4. ControlNot giving emphasis on the It provide detailed system ofcontrolcontrol5. Periodicity of Reporting Usually at the end of theProvides information as andperiod when it is desired by the managers6. Analysis of Profit Disclose the net profit andIt discloses the profit and loss ofloss of the business as aeach product, job or serviceswhole 20. 7. Reporting of CostReported in aggregate in The cost are broken down on afinancial accounting unit basis8. Nature of TransactionRelate to the commercial Relate to the manufacture oftransaction of the businessgoods and services9. InformationMonetary information are Non-monetary information areused also used10. Fixation of selling price Do not maintained with the Provides sufficient data forobject of fixing price pricing11. Figures Deals mainly with actual Deals partly with facts andfigures and factsfigures partly with estimates12. Reference Reference can be made in No such reference is possiblecase of difficulty to thecompany law13. Relative Efficiency Does not provide the It provides the relativerelative efficiencies of the efficiency of the variousworkers, plant and workers, plants and machinerymachinery14. Stock of ValuationStock are valued at cost orStock are valued at costmarket price which ever isless15. Types of ScienceIt is a positive science It is not only a positive science