Fundamentals of Management Accounting · Ch 1 — Introduction to Management Accounting
Cost Accounting vs Management Accounting
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Cost Accounting vs Management Accounting
Cost accounting and management accounting are closely related — indeed cost accounting is one of the main sources of data for management accounting — but they are not the same, and a common examination question asks how they differ.
Cost accounting is concerned mainly with ascertaining, recording and controlling the cost of products, jobs, processes and services. Management accounting is wider: it uses cost data (and financial data, and other information) to help management with the whole task of planning, decision-making and control.
| Basis of comparison | Cost Accounting | Management Accounting |
|---|---|---|
| Main concern | Ascertainment, recording and control of cost | Providing information for planning, decision-making and control of the whole business |
| Scope | Narrower — limited to matters of cost | Wider — covers cost accounting, financial accounting, budgeting, analysis and more |
| Data used | Mainly quantitative cost data | Both quantitative and qualitative, financial and non-financial data |
| Basis | Draws on financial accounting records | Draws on both cost accounting and financial accounting, and on other sources |
| Time focus | Concerned with past and present costs, and with cost control | More concerned with the future — forecasting and planning |
| Relationship | It is a part of, and a feeder to, management accounting | It uses cost accounting as one of its main tools |
| Techniques | Job costing, process costing, standard costing, marginal costing, etc. | Uses all cost-accounting techniques plus ratio analysis, fund-flow, cash-flow, budgetary control, etc. |
| Installation | Can be installed on its own | Usually requires a good cost accounting system already in place |