What is the difference between management accounting & cost accounting?
Management Accounting
Management accounting is the preparation of financial statements collected from the data available from the bookkeeping work. Managers make short and long-term decisions using these reports. Usually, management accounting gets the data from cost and financial accounting.
Managers get help from this to follow the business goals by identifying, measuring, analyzing, interpreting, and communicating with others. It also helps to control to assist the management in formulating and implementing its strategy.
Management accounting helps formulate financial policy, cost control, budget preparation, employee performance, and fraud prevention.
On the other hand, cost books are prepared in a cost accounting system from data from financial accounting at the end of each accounting period.
Efficient and effective performance of concern is the primary role of management accounting.
The success of management accounting depends on proper cost accounting systems.
Cost accounting
It is a form of managerial accounting to assess and calculate the cost of production using variable and fixed costs incurred during every step of the cost of production of products. The manufacturing industry uses cost accounting mainly to set prices without incurring a loss to the company. If the company does not use cost accounting in manufacturing the product, it might incur a loss by underpricing or lack of sales due to overpricing. Therefore, calculating the ideal price for the product or service using the cost accounting principles.
Mainly assists in cost control & decision-making.
The primary purpose of cost accounting is the determination of costs and controlling the costs.
The success of cost accounting does not depend on management accounting.
Provides future cost-related decisions based on the historical cost information
Cost accounting helps determine the amount of expenditure and what type of expense occurred.
A statutory audit of cost accounting reports is sometimes necessary for massive business houses.
When costing is done regularly, it helps to know the periodic determination of profit and loss of the product’s production.
Cost accounts help ascertain the cost reduction and pricing of each activity.
Cost and management accounting is a form of accounting that aims to maximize profit by managing revenues and expenses. It provides data and reports to managers to inform their long-term gain and growth strategies.