Page 10 - DCOM302_MANAGEMENT_ACCOUNTING

Unit 1: Introduction to Accounting

The main differences between financial accounting and cost accounting are given as under: Notes
Table 1.2: Financial Accounting vs. Management Accounting

Sl.No Point of Difference Financial Accounting Management Accounting
1. Objectives The supply of information about Information is supplied with the
the enterprise through P&L A/c purpose of making decisions –
and balance sheet to outside for internal use only.
parties – Mainly for external use.
2. Analysis of It extends over the total It deals with detailed analysis of
performance performance of the fi rm in performance of each and every
general. department of the organisation.
3. Utilisation of Data It handles only the past data of It envisages the future policies
the enterprise. and plans.
4. Nature It is a measurement of It is a judgment of
performance, i.e. more objective. performance—more subjective.
5. Accuracy of results It has to ensure the accuracy It need not, instead it is mainly
forever. for internal use depends upon
approximation.
6. Legal responsibility Compulsory for joint stock It is not compulsory but
companies – Accounting period optional.
concept.
7. Limitation on It provides room only for the It considers both monetary and
transactions monetary transactions. non- monetary transactions at
a time together—Qualitative
changes are considered.
8. Exercise the path of Being the contributory of past It is able to highlight the
control information; not able to monitor deviations of the actual from the
the plans properly. plans and earmark the reasons
for the deviations.

Task Prepare the proforma of key fi nancial statements prepared under fi nancial
accounting and cost accounting.

Self Assessment

Fill in the blanks:
4. The fundamental principles of ……………… are applicable in financial accounting as well

as cost accounting.
5. ……………… deals with detailed analysis of performance of each and every department of
the organisation.
6. Main purpose of ……………… is to ascertain the cost.
7. ……………… uses only quantitative information pertaining to the transactions.
8. The causes for losses and wastages of a business or industry are provided by ………………
and cost accounting.
9. Few authorities of accounting consider cost accounting to be the branch of ………………
accounting.

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