{"id":7052,"date":"2023-05-12T17:24:39","date_gmt":"2023-05-12T17:24:39","guid":{"rendered":"https:\/\/commerceiets.com\/?p=7052"},"modified":"2023-05-12T17:24:40","modified_gmt":"2023-05-12T17:24:40","slug":"while-financial-accounting-is-external-cost-accounting-is-internal-to-the-business-discuss","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/while-financial-accounting-is-external-cost-accounting-is-internal-to-the-business-discuss\/","title":{"rendered":"While Financial Accounting is external Cost Accounting is internal to the business – best explanation"},"content":{"rendered":"\n

While Financial Accounting is external Cost Accounting is internal to the business. Discuss<\/h3>\n\n\n\n

The distinction between financial accounting and cost accounting lies in their focus and audience. Financial accounting is primarily concerned with providing financial information to external stakeholders, such as investors, creditors, regulatory bodies, and the general public. On the other hand, cost accounting focuses on gathering and analyzing cost-related data for internal use within the organization.<\/p>\n\n\n\n

Here are the key differences between financial accounting and cost accounting in light of this statement:<\/p>\n\n\n\n

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  1. Purpose:<\/strong> Financial accounting aims to prepare financial statements (such as the balance sheet, income statement, and cash flow statement) that present an organization’s financial performance and position to external parties. It focuses on providing a summary of the company’s financial activities and results. In contrast, the purpose of cost accounting is to support internal management in decision-making, cost control, and performance evaluation.<\/li>\n\n\n\n
  2. Audience:<\/strong> Financial accounting targets external users, including investors, creditors, analysts, and regulatory agencies, who rely on financial statements to make investment decisions, assess creditworthiness, and evaluate compliance with accounting standards. Cost accounting, on the other hand, serves the needs of internal management, including managers, executives, and operational staff who require cost information for planning, control, and decision-making within the organization.<\/li>\n\n\n\n
  3. Reporting:<\/strong> Financial accounting follows specific accounting standards and principles (such as Generally Accepted Accounting Principles – GAAP or International Financial Reporting Standards – IFRS) to ensure consistency and comparability of financial statements across different companies. These statements must be accurate, reliable, and comply with legal and regulatory requirements. In contrast, cost accounting has more flexibility in reporting and analysis methods. It can adopt various costing techniques, such as job costing, process costing, or activity-based costing, based on the specific needs of the organization.<\/li>\n\n\n\n
  4. Timeframe:<\/strong> Financial accounting primarily focuses on historical data, reporting past financial performance and results. It provides a snapshot of an organization’s financial position at a particular point in time (e.g., quarterly or annually). Conversely, cost accounting incorporates both historical and future-oriented data. It analyzes past costs to understand cost behavior and uses this information to estimate and plan for future costs, making it more forward-looking in nature.<\/li>\n\n\n\n
  5. Legal requirements:<\/strong> Financial accounting is subject to strict legal and regulatory requirements, including compliance with accounting standards, statutory audits, and financial reporting obligations. These requirements aim to ensure transparency, comparability, and accountability for external stakeholders. Cost accounting, being internal to the organization, does not have the same legal mandates but still follows established cost accounting principles and best practices.<\/li>\n<\/ol>\n\n\n\n

    In summary, financial accounting focuses on providing external stakeholders with a comprehensive view of an organization’s financial performance, while cost accounting is an internal tool used for decision-making, cost control, and performance evaluation within the organization. Financial accounting follows strict rules and regulations to ensure the accuracy and reliability of financial statements, whereas cost accounting allows for more flexibility in reporting and analysis methods tailored to internal management needs.<\/p>\n\n\n\n

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    CONNECT ON LINKEDIN<\/a><\/div>\n<\/div>\n\n\n\n
    Also Study<\/strong><\/td>Also Study<\/strong><\/td>Also Study<\/strong><\/td>Also Study<\/strong><\/td><\/tr>
    Cost Accounting<\/a><\/td>Scope of cost accounting<\/a><\/td>Elements of cost<\/a><\/td>Types of cost<\/a><\/td><\/tr>
    Material control<\/a><\/td>Perpetual inventory system<\/a><\/td>Pricing of materials<\/a><\/td>Bin Card<\/a><\/td><\/tr>
    Stores Ledger<\/a><\/td>Incentive plans<\/a><\/td>Overheads<\/a><\/td>Idle time<\/a><\/td><\/tr>
    System of wage payment in cost accounting<\/a><\/td>Time rate vs piece rate wage system<\/a><\/td>Cost Center<\/a><\/td>Labour Turnover<\/a><\/td><\/tr>
    Difference between management accounting and cost accounting<\/a><\/td>Allocation and apportionment of overheads<\/a><\/td>Allocation vs Apportionment of overheads<\/a><\/td>Absorption of overheads<\/a><\/td><\/tr>
    Over absorption and under absorption of overheads<\/a><\/td>Activity based costing<\/a><\/td>Traditional costing vs ABC system<\/a><\/td>Reconciliation of accounts<\/a><\/td><\/tr>
    Unit costing<\/a><\/td>Cost sheet format<\/a><\/td>Cost sheet vs production sheet<\/a><\/td>Job costing<\/a><\/td><\/tr>
    Batch Costing<\/a><\/td>job costing vs batch costing<\/a><\/td>Contract costing<\/a><\/td>Job Costing vs Contract costing<\/a><\/td><\/tr>
    Process Costing<\/a><\/td>Process costing vs job costing<\/a><\/td>Joint products<\/a><\/td>By Product <\/a><\/td><\/tr>
    Equivalent production<\/a><\/td>Marginal costing<\/a><\/td>Application of marginal costing<\/a><\/td>Cost volume profit analysis<\/a><\/td><\/tr>
    Tools and techniques of marginal costing<\/a><\/td>Budget<\/a><\/td>Break even point<\/a><\/td>Process of budgetary control<\/a><\/td><\/tr>
    Advantages and limitations of budgetary control<\/a><\/td>Budgetary Control<\/a><\/td>Zero base budgeting<\/a><\/td>Standard Costing<\/a><\/td><\/tr>
    Variance Analysis<\/a><\/td>Standard costing vs budgetary control<\/a><\/td>Management accounting vs cost accounting<\/a><\/td>Cost accounting vs financial accounting<\/a><\/td><\/tr>
    Why cost accounting is necessary<\/a><\/td>Essentials of good costing system<\/a><\/td>objectives and advantages of cost accounting<\/a><\/td>scope of cost accountancy<\/a><\/td><\/tr>
    Cost accounting is an indispensable tool of modern management<\/a><\/td><\/td><\/td><\/td><\/tr><\/tbody><\/table>
    While Financial Accounting is external Cost Accounting is internal to the business. Discuss<\/figcaption><\/figure>\n\n\n\n
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    While Financial Accounting is external Cost Accounting is internal to the business. Discuss<\/figcaption><\/figure>\n<\/figure>\n","protected":false},"excerpt":{"rendered":"

    While Financial Accounting is external Cost Accounting is internal to the business. Discuss The distinction between financial accounting and cost accounting lies in their focus and audience. Financial accounting is primarily concerned with providing financial information to external stakeholders, such as investors, creditors, regulatory bodies, and the general public. On the other hand, cost accounting…<\/p>\n

    Read More “While Financial Accounting is external Cost Accounting is internal to the business – best explanation”<\/span> »<\/a><\/p>\n","protected":false},"author":2,"featured_media":7053,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[187],"tags":[533],"_links":{"self":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/7052"}],"collection":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/comments?post=7052"}],"version-history":[{"count":2,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/7052\/revisions"}],"predecessor-version":[{"id":7063,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/7052\/revisions\/7063"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media\/7053"}],"wp:attachment":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media?parent=7052"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/categories?post=7052"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/tags?post=7052"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}