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| *Ostroff, Fair and Company>>>Financial Services |
Differentiate between cost accounting and financial accounting? |
Differentiate between cost accounting and financial accounting? Financial accounting refers to accounting refers to accounting for revenues, expenses, assets, and liabilities. It involves the basic accounting processes of recording, classifying, and summarizing transactions. Financial reports prepared under the generally accepted accounting principles (GAAP) promulgated by standard setting bodies are intended to be general purpose in orientation. This means they are not prepared especially for owners, or creditors, or any other particular user group. Instead, they are intended to be equally useful for all user groups. As such, attempts are made to keep them free from bias (neutral). Cost accounting is the branch of accounting dealing with the recording, classification, allocation, and reporting of current and prospective costs. Measurement of Cost involves the methods and techniques used in defining the components of cost (materials, labour & overhead), determining the basis of cost measurement, and establishing criteria for use of alternative cost measurement techniques. Cost accounting is concerned with profit margins on product lines, individual items/projects, etc. Financial accounting is concerned with the big picture and the finacial statements (Balance Sheet, P&L, etc). When I think of Cost accounting I think of profitability analysis, product or job costing, inventory control. Financial Accounting is everything that falls under the controllers responsibilities such as Accounts Payable, Accounts Receivable, Fixed Assets, SEC reporting, internal management reporting and cost accounting. Cost Accounting is really a part of Financial Accounting. Hope this helps. |
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