Difference Between Financial Accounting And Cost Accounting

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(iv) Financial Accounting versus Cost Accounting To understand the concept of cost accounting to the core, it is important to recognise initially as to what makes cost accounting different from financial accounting. The major differences between financial accounting and cost accounting are as follows: Basis of Distinction Financial Accounting Cost Accounting Objective The objective of financial accounting is to provide information about the overall financial position and performance of the business organisation. The objective of cost accounting is to ascertain cost of any particular product or service or activity. Cost accounting aims at cost controlling and provides information in decision-making process. Usability It is used for determining overall profit/loss of any organisation.…show more content…
Outsiders usually do not have any access to cost records. Type of information recorded Financial accounts record only monetary information. Cost accounts record both financial and non-financial information. Analysis of profit In financial accounting, profit is disclosed for the whole business. In cost accounting, profitability is shown for every process, product or operation for revealing the areas of profitability. Table 1.1.1: fFinancial aAccounting versus Ccost Accounting Despite the above differences, both financial and cost accounting work in agreement and provide the desired data to the organisations. Determination of value of stock and cost of goods sold is done in cost accounting. This value of stock and cost of goods sold is used for determining the gross profit, which is a part of financial accounts. In addition, a financial accountant receives a lot of data from a cost accountant for the preparation of financial reports. Thus, despite of the differences, both cost accounting and financial accounting facilitate each other in meeting the overall goal of the organisation. (v) General Principles 1. Cause-Effect
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