Cost Accounting Versus Financial Accounting

Cost Accounting Versus Financial Accounting…Where does the difference lie?

Accounting is classified into sub categories that is cost accounting and financial accounting.Financial accounting is primarily concerned with recording,classifying and summarizing financial transactions relating to the firm.

While cost accounting emphasis on accounting information which is very useful for the management.Cost accounting is the presentation of accounting information in such a manner as it assist the management in the creation of policy and day-to-day operations of a firm.Financial accounting reveals the profits or loss incurred by a firm during an accounting period whereas cost accounting shows the profits,losses and unit costs of different products.

For instance, a factory manufactures two products that is A and B.Financial accounting will tell about the overall profit or loss made by the firm on these two products.Though,financial accounting can’t provide any explanation regarding which product is more profitable either A or B.

Cost accounting helps the management in knowing about the profitability or non-profitability of each procedure involved in the production of a product.Financial accounting provides information which is useful for the outsiders while cost accounting provides information which is useful for the insiders that is the management.For a firm financial accounting is not adequate,cost accounting is also necessary.

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