Cost accounting and Management Accounting are the two major sections of the accounting discipline. Both of them play a very crucial role in making an organization perform better. But many people often use these terms identically. However, there is an obvious difference between them. In this article, we will compare both cost accounting vs management accounting with the help of a table and different key points. The topics included in this blog are as follows.
Cost Accounting Vs Management Accounting
| Cost Accounting | Management Accounting |
|---|---|
| Cost accounting involves recording, summarizing, and classifying of cost data and information of a business entity or an organization. | Management accounting involves the provision of both financial and non-financial data to the managers of an organization. |
| It deals with quantitative transactions only. | It deals with both qualitative and quantitative data. |
| Cost accounting is a narrow concept that mainly focuses on allocation, ascertainment, distribution, and accounting factors of the cost. | Management accounting has a wider scope as it involves cost effect as a part |
| Reducing and controlling costs is the main objective of cost accounting. | The objective of management accounting is to assist management in decision-making processes. |
| Cost accounting does not depend on management accounting for effectiveness. | It depends on cost accounting for its effectiveness. |
| Cost accounting adheres to a certain procedure, which means there is a definite concept for determining pricing and format. | It does not follow specific techniques or procedures, which means there is no definite principle for it because the format changes depending on the needs of management. |
| It obtains data sources from financial accounting. | Management accounting obtains data from both financial and cost accounting. |
| Cost accounting is a short-term planning | Management accounting is a long-term planning |
| Cost accounting record both past and present data | Management accounting focuses mainly on planning for future initiatives or projects. |
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Definition Of Cost Accounting
In economics and finance, cost accounting refers to the process of collecting, recording, classification, ascertaining, and analyzing information and data related to the cost of production and operation. It provides very crucial and meaningful information about costing and pricing data to help the manager in decision-making processes. The main objective of cost accounting includes tracking production, fixed, and other relevant costs for a business entity or a firm. This information helps the firm or an organization in controlling and reducing various costs and improving its performance.
Cost accounting is a bit similar to financial accounting, but it is not communicated or reported at the end of the financial year. The cost accounting process is actually done by the company’s own employees.
Definition Of Management Accounting
Management Accounting is also one of the major branches of accounting. It deals with reporting, measuring, analyzing, interpreting, and communicating both financial and non-financial statements to the managers for achieving business goals. It can also be called managerial accounting. Also, it is concerned with the collecting, recording, and preparation of data related to both qualitative and quantitative facets of an organization.
The data and information provided by management accounting are useful in making decisions, outlining budgeting, forecasting plans, making policies and strategies, comparing, and tracking managerial performance.
Key Differences Between Cost Accounting And Management Accounting
The key differences between cost and managing accounting are as follows.
- Cost Accounting refers to the process of collecting, recording, classification, ascertaining, and analyzing information and data related to the cost of production and operation. On the other hand, Management Accounting deals with reporting, measuring, analyzing, interpreting, and communicating both financial and non-financial statements to the managers for achieving business goals.
- While Cost Accounting helps to provide financial information only, Management Accounting provides both financial and non-financial data.
- Cost Accounting can be installed without Management Accounting. On the other hand, management accounting cannot be installed in the absence of a proper system of Cost Accounting.
- Cost Accounting primarily focuses on reducing and controlling the costs of producing products. On the contrary, the main objective of Management Accounting is to provide valid and informative data to the managers of the company for setting goals and future activities.
- Also, a cost Accountant has to follow specific rules and procedures while preparing cost accounting data. On the other hand, there are no specific rules and procedures in the case of management accounting.
- The scope of Cost Accounting is narrow as it only deals with the costing facets of an organization. On the other hand, Management Accounting comparatively has a wider scope as it covers the aspects like tax budgeting, financial accounting, forecasting, analysis, and planning.
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- Difference Between Short-Term and Long Term Capital Gain
- Difference Between Bookkeeping and Accounting
- Difference Between Cash and Accrual Accounting
Similarities
Asides from differences, there are some similarities between cost accounting and management accounting as well. These similarities are as follows.
- Both of them are branches of Accounting
- Cost Accounting and Management Accounting use many similar rules, procedures, and techniques of Accounting, Computation, and Analysis.
- Both of them help in decision-making processes.
Conclusion
With the above explanations and differences, we can finally conclude that both cost and management accounting are the major tools and aspects of accounting. Every business and organization endeavor to set the best accounting system in order to grow and retain stability in the market.
Cost Accounting refers to the process of collecting, recording, classification, ascertaining, and analyzing information and data related to the cost of production and operation. On the other hand, Management Accounting deals with reporting, measuring, analyzing, interpreting, and communicating both financial and non-financial statements to the managers for achieving business goals.
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