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Management Accounting




                    Notes          Though some number of differences can be identified between cost accounting and management

                                   accounting, the line of difference is very thin. Because, cost accounting, at present, comprises of
                                   some of the advanced techniques and systems of costing such as budgetary control, marginal
                                   costing, standard costing, etc. and therefore, it tends to conform to management accounting.
                                   Consequently, not much difference can be found between the two. The main differences between
                                   cost accounting and management accounting are given as under:

                                                    Table 1.1: Cost Accounting vs. Management Accounting

                                     Sl.No.  Point of Difference  Cost Accounting    Management Accounting
                                     1.    Objectives        Its main purpose is to ascertain  Its major objective is to make
                                                             the cost.               decisions through supplement
                                                                                     presentation of accounting
                                                                                     information.
                                     2.    Scope             It deals only with the cost and   It not only deals with the cost but
                                                             related aspects.        also revenue. It is wider than cost
                                                                                     accounting.
                                     3.    Utilisation of Data  It uses only quantitative   It uses both qualitative and
                                                             information pertaining to the   quantitative information for
                                                             transactions.           decision- making.
                                     4.    Utility           It ends only at the presentation  It starts from where cost
                                                             of information.         accounting ends; meaningful cost
                                                                                     informations are major inputs for
                                                                                     decision-making.
                                     5.    Nature            It deals with the past and   It deals with future policies and
                                                             present data.           course of actions.


                                   The cost accounting is very closely-related to financial accounting. Few authorities of accounting
                                   consider cost accounting to be the branch of financial accounting. But it may be said that cost

                                   accounting is complementary to financial accounting. Financial accounting and cost accounting


                                   are both similar in various ways. The main relationship between financial accounting and cost
                                   accounting are given as under:
                                   1.   The fundamental principles of double entry system are applicable in fi nancial accounting
                                       as well as cost accounting.
                                   2.   The results of business or organisation are revealed by both the systems of accounts.
                                   3.   The determination of future business activities and policy is guided by both accounting
                                       systems.

                                   4.   A basis for comparison of expenditures is being provided by both the accounting systems.
                                   5.   The invoices and vouchers constitute the common basis for recording transactions under
                                       both the systems of accounting.

                                   6.   The causes for losses and wastages of a business or industry are provided by fi nancial and
                                       cost accounting.

















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