DIFFERENCE BETWEEN COST ACCOUNTING AND FINANCIAL ACCOUNTING

The difference between cost accounting and financial accounting is as follows:

COST ACCOUNTING

Cost Accounting is an art or process of recording, analyzing and classifying of expenditure for the purpose of product costing or service costing, ascertainment of profitability, operational planning and cost control. It is a forward looking approach which is related to the recording, analyzing and classifying of expenditure with the objective of ascertaining the total and per unit cost of product or service.

FINANCIAL ACCOUNTING

Financial accounting is the branch of accounting, which keeps all the records of monetary transaction and events and reports the financial information to parties interested at the end of the financial year. The financial statements prepared are statement of profit and loss and position statement i.e. balance sheet.

BASIS OF DIFFERENCE	COST ACCOUNTING	FINANCIAL ACCOUNTING
MEANING	Cost accounting is a branch of accounting that deals with the ascertainment, recording and controlling of the costs.	Financial accounting refers to identification of monetary transactions, its classification, summarization, analysis, interpretation and communication of financial information to the users.
INFORMATION RECORDED	Cost accounting records contain the information about labor cost, material cost and overheads cost.	Financial accounting records all the monetary transactions and events.
TYPE OF COST USED FOR RECORDING	Cost Accounting makes use of historical costs or predetermined costs for making the accounts.	Only historical costs are used as the base for recording the transactions in the books of accounts.
USERS	Cost accounting is internal accounting to the organization. Its main users are manufacturers, management or employees.	Financial accounting has internal and external users such as management, owners, creditors, lending agencies, research scholars, government, consumers, public etc.
VALUATION OF STOCK	In cost accounting, the stock is valued at original cost.	In financial accounting the stock is valued at original cost or realizable cost whichever less is.
MANDATORY	The preparation of cost accounting records is not mandatory except for manufacturing firms.	The preparation of financial records is mandatory.
PUBLICATION OF ACCOUNTS	It is not compulsory to publish the cost accounting records.	It is compulsory to publish the financial statements and submit them with the registrar at the end of the financial year.
REPORTING TIME	The cost accounting records are reported to the management at short intervals of time i.e. Weekly, fortnightly or monthly.	The financial records are reported quarterly, half yearly or annually.
ANALYSIS OF PROFIT	In this, the profit is analyzed individually for each process, unit, job, contract, operation etc.	In this, the overall profit position is analyzed by preparing the statement of profit and loss account.
PURPOSE	The purpose of preparing cost accounting records is to record and control the costs.	The purpose of preparing financial accounts is to determine the financial position of the organization.
FORECASTING	Forecasting of costs can be possible through the budgeting techniques.	In financial accounting, forecasting is not possible at all.
ESTIMATION	Cost accounting is based on the comparison between the actual and the estimated cost of the transaction.	In financial accounting, the recording is always done on the basis of actual transactions only,. There is no place for estimation.
PARTICULAR PERIOD	Cost accounting is not done as per the particular period. Rather it is done as per the needs of the management.	Financial accounting records are maintained for a particular year by following the accounting period concept.
TOOLS	The tools of cost accounting are standard costing and variance analysis, marginal costing, budgetary analysis or break-even point etc.	The tools of financial accounting are trial balance, journal, ledger, cash books, other subsidiary books etc.
MEASUREMENT OF EFFICIENCY	As cost accounting tries to find out the pixel view of operations, it is able to produce a lot of loopholes of labors and other inputs and also offers valuable feedback to improve the efficiency of the inputs.	Financial accounting shows the big picture of a company, as a result, financial accounting is not able to improve the efficiency of the inputs.

CONCLUSION

To conclude the difference between cost accounting and financial accounting, it can be said that the information provided by the cost accounting records is helpful in controlling the costs by managers, but it lacks comparability. On the other hand, the financial records information is comparable but cannot be able to help in forecasting accurately about the future activities of the concern.

QUESTIONS COVERED

Differentiate between financial accounting and cost accounting. Give scope of cost accounting.

Explain the differences between financial accounting and cost accounting?

Also Study	Also Study	Also Study	Also Study
Accounting	Non profit organisation	Depreciation	Liquidity ratios
Nature of Accounting	Receipts and Payments Account	Depreciation Accounting	Acid Test Ratio
Benefits of Accounting	Scope of accounting	Hire Purchase Accounting	Cash Ratio
Difference between cost accounting and financial accounting	Financial accounting, cost accounting and management accounting	Difference between hire purchase and instalment system	Financial ratio analysis
Difference between transaction and event	Transactions	Users of Accounting	Ratio analysis
Limitation of Accounting	Capital Expenditure	Instalment System	Difference between consignment and sale
Book Keeping	Revenue Expenditure	Reserves Accounting	Abnormal loss vs normal loss in consignment
Accountancy	Difference between capital and revenue expenditure	Provisions	Treatment of loss on consignment
Accounting as science or an art	Accounting Equation	Single entry system	Accounting treatment of consignment
Book Keeping vs accounting	Deferred Revenue Expenditure	Difference between statement of affairs and balance sheet	Joint venture vs consignment
Book keeping vs accountancy	Capital receipt	IFRS	Departmental Accounting
Accounting vs accountancy	Revenue receipt	Balance Sheet	Methods of departmental accounting
Basis of Accounting	Difference between capital and revenue receipt	Profit and loss Account	Allocation of expenses in departmental accounting
Branches of accounting	Difference between accounting concepts and conventions	Trading Account	Inter-departmental transfers
Cash and mercantile system of accounting	Accounting Standards	Voyage Account	Different types of branches
Accounting Principles	Objectives of Accounting	Accounting for Incomplete Voyage	Departmental vs Branch accounting
Golden ru les of accounting	Process of Accounting	Joint venture	Methods of branch accounting
Double entry system of book keeping	Scope of Accounting	Joint Venture Vs Partnership	Incorporation of branch trial balance
Double entry vs Single entry system	Accounting Concepts vs Accounting conventions	Methods of recording transactions in Joint Venture	Garner VS Murray Rule
History of Accounting	Difference between provisions and reserves	Consignment