Management Accounting vs Cost Accounting
Management Accounting is a type of accounting in which one needs to present and provide account-related information to the management in an organized and a proper way so that it can accomplish its administrative functions of the arrangement, supervising, and decision-making in a productive and in a well-ordered manner. The main aim of management accounting is to give information for intramural decision-making, with a focus on planning and control purposes.
Cost Accounting is a type of accounting that deals with recording, classifying, and summarizing costs for products or services, arrangement, controlling, and reducing costs and also helps in decision making. It calculates and announces information related to the cost of utilizing resources. It is popularly known as a specialized branch of accounting. It involves categorization, aggregation, and control of costs.
The difference between Management Accounting and Cost Accounting is that Management accounting gives us all accounting details whereas Cost accounting gives us just cost details for managerial motive.
Comparison Table Between Management Accounting and Cost Accounting (in Tabular Form)
|Parameter of Comparison||Management Accounting||Cost Accounting|
|Objective||The key objective of Management Accounting is to give useful details to management for decision-making.||The key objective of Cost Accounting is to give deduce and control costs.|
|Types of Transactions||It deals both with financial and non-financial transactions.||It deals only with financial transactions.|
|Basis||This type of accounting purely deals with future transactions.||This type of accounting deals both with present and future transactions.|
|Scope||Management accounting has a wider scope as it covers the regions of financial accounts, cost accounts, and tax accounts.||Cost accounting has a confined scope as it covers matters only related to control of cost.|
|Utility||Management accounting helps just for the needs of intramural management.||This accounting helps for the needs of both external and internal parties.|
What is Management Accounting?
Management Accounting is a tool to help the management in securing better planning and control over the organization. Many institutions hire very educated management accountants like ICMA, CIMA, ICWAI, etc. It purely works for internal parties and management. It informs internal decisions, gives feedback on operating presentation of the businesses. It also calculates financial performances. This accounting employs unique approaches like level of costing, budget control, management costing, ratio inspection, responsibility accounting, etc.
What are the objectives of Management Accounting?
- Cash Flow Management
- To motivate the workforce
- Cost control
- To reduce tax expenses
- Better planning for future policies
- Controlling Management Performance
- Interprets financial details
- Proper and accurate decision-making
- Calculation of Profit and Loss
What are the functions of Management Accounting?
- New product analysis
- Aids in Financial accounting
- Variance analysis
- Break-even analysis
- Stock valuation
- Capital budgeting analysis
What is Cost Accounting?
Cost accounting is a type of accounting process that aims to apprehend a company’s cost of production by evaluating the input cost of each step of production as well as fixed cost such as the devaluation of capital appliances. Cost accounting is mostly used in an organization or in a company or a firm to aid decision making. Cost accounting can be very favourable and helpful as a piece of equipment for management in setting up budget and cost control programs, which can upgrade total net margins for the company in the future.
What are the objectives of Cost Accounting?
- Guide to business policies
- Ascertainment of Cost
- Cost reduction and cost control
- Determination of Selling price
- Estimation of Cost
- Smooth the preparation of financial and other statements
- Helps in decision-making
- Provides Statistical Data
- Helps in preparation of budget
- Helps in the presentation of correct information and accurate details
What are the functions of Cost Accounting?
- To compute product-wise profit
- To calculate cost per unit
- To install and implement cost control systems
- To establish an effective reporting system
- To prepare a correct cost analysis
- To advice management for future expansion
- To provide needful information for the determination of selling price
- To ascertain the wastage in each process of manufacture
Main Differences Between Management Accounting and Cost Accounting
- Cost Accounting is based on data extracted from financial accounts whereas Management Accounting is based on data derived from cost accounting and other sources.
- Cost Accounting can be installed without Management Accounting whereas Management Accounting cannot be installed without a proper system of Cost Accounting.
- Cost Accountant is at a very lower level in ranking whereas the Management Accountant is placed at a very higher and a superior level in ranking as compared to Cost Accountant.
- The development of Cost Accounting is mainly due to the restriction of financial accounting whereas the development of Management Accounting is mainly due to the restriction of cost accounting.
- The emphasis of Cost Accountant is mainly on cost ascertainment and cost control to ensure maximum profit whereas the emphasis of Management Accounting is mainly on planning, controlling and decision making to maximize the profit.
- In Cost Accounting, conservation of cost records has been made compulsory in some industries whereas, in Management Accounting, it is not made compulsory to conserve the cost records and made purely voluntary.
- Cost Accounting works only on short-range planning whereas Management Accounting works both on short-range and long-range planning.
Both the terms discussed are the two different types of Accounting. In the world of multi-skill companies and organizations, Management Accounting has become a necessary part of management which helps in decision making and provides guidance to the organization or the company at each step.
Management Accounting increases the regulation of the management and boosts up the working speed and determination of employees and promote them with confidence. Cost accounting has to undergo limitations of Management Accounting. Cost Accounting depicts the costs of single units and conquer the financial accounting. Its main goal is to dapple the regulation and inefficiencies in the use of facts, data, labour workers, apparatus.
Word Cloud for Difference Between Management Accounting and Cost Accounting
The following is a collection of the most used terms in this article on Management Accounting and Cost Accounting. This should help in recalling related terms as used in this article at a later stage for you.