cost accounting helps in finding out cost of a product and
control of cost.whereas financial accounting helps in
knowing the financial position of the business i.e is
profit or loss in a financial year.
Financial accounting is the reporting of financial
information to people outside of the business, e.g.
shareholders, creditors, or financial analysts. The reports
consist of financial statements, including the balance
sheet, income statement, statement of capital, and cash
Cost accounting is done primarily for management inside the
business. It consists of determining the cost of producing
a product or a service. Cost accounting information is used
to control the operations of the company, and much of that
information eventually winds up in the financial
statements. However cost accounting information is reported
in whatever form management wants, whereas financial
accounting reports are prepared in standard formats in
accordance with generally accepted accounting principles.
Cost accounting is related to calculate the cost of
materails, labour, overheads and cost of related jobs and
contracts.In company cost Accounting helps to calculate the
real cost of production but finacial accounting is
associated with maintaining the accounts in the company it
maintains the flow of funds in the company.
The focus of cost accounting is essentially internal. it
tends to provide information about costs and cost estimates
to the parties within the firm for decision making.
Financial accounting provides consolidated information to
parties external to the business firm regarding its
operations and financial conditions. such parties include
share holders, bankers, creditors, debenture-holders,
government and tax authorities.
Under Cost Accounting the correct per unit cost of
Manufactured goods or services can be determined and the
future estimated costs of goods can be known while
Financial Accounting shows the the total Profit/Loss and
economic position of a business at the end of the year.
The Difference between financial and cost is that in
financial accounting all business transaction between
debtor and creditor are determined. Cost accounting is used
for managerial decision making, how much cost is spent in
all production as well as admin department. What amount of
budget is required in future and all receipt forecasting.
Hai im V.K.Tanseer Shadab,M.com,DEE,DCE,ICWA,MBA,MCA..
I will try to explain in brief you about
Cost A/c (V/s) Finacial A/c that may more exhausted to you.
(A) STATUTORY OBLIGATION
Their is no any Statutory Obligation indeed to maintain
such A/c for maintain CostA/c.
In case of Finacial A/c its Statutory Obligation,several
Acts has governs like INDIAN COMPANIES ACT 1956, INSURANCE
COMPANIES ACT, INDIAN INDUSTRIAL ACT etc.
(B) ADMINISTRATIVE PURPOSE
For Administrative concern its may irrelevant to them.for
maintaining the Cost A/c.
But in Case of Financial A/c its fetch the real fair of
the business during the year.
(C) MANAGEMENT PURPOSE
Maintaing of systematic Cost A/c its a seems to be a
vigilance Management (in short effective Management).
Though they maintain the Finacial A/c its a bounded
duties of the Managemet.
Cost A/c may cover its some specific areas,like
The Financial A/c may cover as a Whole of the Organisation
right from Raw material purchased to Sold of Goods.
(E) APPOINTMENT OF AUDITURE
For Cost A/c appointment of Auditore is optional
one.those who aware of A/c they may can handle such A/c.
In case of Financial A/c Auditore must be Appointed as
per the insists of several ACTs like INCOME TAX ACT
1961,INDIAN COMPANIES ACT 1956 etc,(AUDITURE means he/she
must be CA i.e showed qualified Chartered Accountant.
(F) INSURANCE AUTHORITIES
Insurance Authorities they may go through the Cost
A/c ,because they may know that its internal A/c which
disclosed the real facts of the business.
Though they may go through the Financial A/c randomly.
Cost A/c is maintains for to reveal the real facts of
business normally its may go through by the internal
As we discuss in earlier its Statutory Obligatory
one,apart from that the outsider eagerly wanted to view the
status of the firm During the specific period of time.like
Investor,Tax Authorities,Bankers (for Credit Grant(OD)over
draft),Financer,Debenture Holders etc..
Cost A/c can disclose the real facts of the firm without
hiding any point, because its maintain by internally ie.
(Management)in short its seems Net Result.
Financial A/c treat in such a way that real facts of firm
may not be reveal for eg:(i)Every Year Depreciation is to
be deducted as treating as loss But as per management
concern its falls on the Business it self. eg(ii)Specific
Reserves may not shown in the Balance Sheet of Final A/c
of Finacial A/c. but in Cost A/c all such Reserved are
Displayed.Hence it Shows the Gross Result.
For Decison Making purpose Cost A/c is a Vital A/c to take
the Managerial Decision.
Though Financial A/c its some how need to take Decision but
not upto the Cost A/c.
Cost A/c can fetch the NON MONETARY aspects like
performance of a indivial, Work Experience etc because its
focus on specific areas.
In case of Financial A/c its fully focused on MONETARY
aspects only financial transaction are carried out.
Their is no any Specific Methodology is to be followed,it
may depend upon the internal persons based on their
convinince they may follow the rules like Single Entry Rule
or Double Entry Rule etc.
As far as Financial A/c concern,its advice to follow the
Double Entry System it may follows some sort of rules like
Banks they may have the seperate format to build the A/c.
For Cost A/c their is no any hard or fast rules to follow
the Accounting year to Opening & Closing of A/c
Accounting year means 12month report sarts from 1st date of
April to 31st of April will be treated as Accounting year.
its may continued years together.
In case of Financial A/c it will be closed(Accounting Year)
feel free to ask any Clarification at any point or any
subject it may A/c 0r Commerce 0r Electrical & Electronics
0r in Computer Related Both Hardware & Software concern.