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Financial Accounting
“Accounting is the art of recording, classifying and summarizing in a significant manner and in
terms of money, transactions and events, which are in part at least, of a financial character, and
interpreting the results thereto.”
7. It will not provide information to management for planning and decision making.
Cost Accounting emerged as an accounting system to face high competition in the business.
In order to withstand competition the concerns have to supply goods at low prices.
Companies could be able to supply goods at low prices only be reducing the cost of
production. Cost Accounting as a subject is designed to provide many methods and
techniques to reduce the cost of production through various stages of production.
1. Costing
2. Cost Accounting
3. Cost Accountancy
Classification of Costs
a. Material Cost
b. Labour Cost
c. Expenses
a. Production Cost
b. Administration Cost
c. Selling and Distribution Cost
a. Direct Cost
b. Indirect Cost
a. Fixed Cost
b. Variable Cost
c. Semi-Variable Cost
a. Controllable Costs
b. Uncontrollable Costs
On the basis of Time
a. Historical Costs
b. Pre-determined Costs
a. Relevant Costs
b. Irrelevant Costs
1. Provision of Data
2. Modification of Data
3. Analysis and interpretation of Data
4. Communication Function
5. Fix standards at all level
6. Function of Control
7. Provides Qualitative information
1. Financial Accounting
2. Cost Accounting
3. Statistical Methods
4. Revaluation Accounting
5. Budgetary Control
6. Inventory Control
7. Interim Reporting
8. Internal Audit
9. Taxation
10. Financial Management
Utility of Management Accounting
1. Planning
2. Organising
3. Co-ordinating
4. Motivating
5. Communicating
6. Controlling
1. Management Accounting is concerned with the preparation of various statement meant fir
managerial planning, control and decision making. Hence, it is future oriented. But
financial Accounting is concerned with the recording the past events only.
2. Management Accounting aims at providing information for the management. Financial
Accounting aims at providing information external to the management, like shareholders,
debenture holders, creditors, Government etc.
3. There is no limit in the preparation of accounts and statements in Management
Accounting. It may be prepared for 15 days or 1 month, 2 months,3 months, etc., as per
the requirements of the management. But, Financial Accounting is prepare only for one
year. The profit and los account and the balance sheet are prepare at the end of the
financial year.
4. Management accounting is concerned with quantitative and qualitative information. But
Financial Accounting is concerned only with quantitative information.
5. There is no compulsion for the preparation of Management Accounting. Financial
Accounting is compulsory according to the companies act 1956.
6. Reports of the Management Accounting are not circulated to external parties. It only
provided for the management to take managerial decisions. But the reports of the
Financial Accounting including the Profit and Loss Account and Balance Sheet are
circulated to the external parties also.