Difference between Financial Accounting and Cost Accounting

Main Difference

In broader terms, the accounting process is concerned with keeping detailed records and predicting the economic nature of business. It gives the assurance that all the actions carried out in a company are correct and in accordance with the requirements. There are many terms that are used in it, and two of them are known as Financial Accounting and Cost Accounting. The main difference in both is that financial accounting is the first step in any business, while cost accounting is the second phase of that process. Cost accounting cannot take place without a proper financial audit. First, define the terms that will help develop a good understanding. Cost accounting is a process in which accounts are managed with the help of data received from financial accounting, this is done at the end of each financing cycle according to a company. Financial accounting is different in that it records all the activities that are carried out, including monetary transactions, which help develop statements that are presented to management to help them make individual decisions. We can say that the main objective of cost accounting is to provide information related to costs so that they can be managed according to the budget and decisions can be made accordingly. While financial accounting goes into detail to keep all factors in perspective and does not always depend only on the figures that are presented. It deals with most of the data in different ways and not only deals with the small chunks. Cost accounting is about ensuring that all costs are managed, while financial accounting is concerned with the goal of showing the correct evaluation of a company so that better arrangements can be made to further improve the position. Therefore, it does not estimate or guess anything, it only takes into account the factual data. Some of the other factors related to this will be discussed in the next two paragraphs and the differences, simply put, will be given at the end. It deals with most of the data in different ways and not only deals with the small chunks. Cost accounting is about ensuring that all costs are managed, while financial accounting is concerned with the goal of showing the correct evaluation of a company so that better arrangements can be made to further improve the position. Therefore, it does not estimate or guess anything, it only takes into account the factual data. Some of the other factors related to this will be discussed in the next two paragraphs and the differences, simply put, will be given at the end. It deals with most of the data in different ways and not only deals with the small chunks. Cost accounting is about ensuring that all costs are managed, while financial accounting is concerned with the goal of showing the correct evaluation of a company so that better arrangements can be made to further improve the position. Therefore, it does not estimate or guess anything, it only takes into account the factual data. Some of the other factors related to this will be discussed in the next two paragraphs and the differences, simply put, will be given at the end. whereas financial accounting deals with the objective of showing the correct evaluation of a company so that better arrangements can be made to further improve the position. Therefore, it does not estimate or guess anything, it only takes into account the factual data. Some of the other factors related to this will be discussed in the next two paragraphs and the differences, simply put, will be given at the end. whereas financial accounting deals with the objective of showing the correct evaluation of a company so that better arrangements can be made to further improve the position. Therefore, it does not estimate or guess anything, it only takes into account the factual data. Some of the other factors related to this will be discussed in the next two paragraphs and the differences, simply put, will be given at the end.

Comparative chart

Financial Accounting Cost accounting
Definition It can be defined as the action that helps to keep the total record of all money-related activities that take place in a company. Assist management in making money-based decisions for which quantitative data is used.
Scope It can include information from journals, payroll, some people who work, total sales made, and anything that has some kind of figure involved. Since all the information is in monetary terms or in figures that are essential to determine the future of a company in terms of expenses.
Base It is the basis of cost accounting. cannot lead to financial accounting
Target Record all transactions that take place in the company so that statements can be made. Controlling the money that is spent is the main objective.

Definition of financial accounting

Financial accounting can be defined as the action that helps to keep the total record of all money-related activities that are carried out in a company. These can include information from journals, pay stubs, some people who work, total sales made, and anything that has some kind of figure involved. It takes place at the end of each year and is the first accounting step, followed by cost accounting and management. They maintain records of transactions that help develop the financial statements that are provided to management to maintain control and make the correct decisions in the circumstances.

Definition of cost accounting

The main function of cost accounting is to help management in making decisions based on money for which quantitative data is used, since all information is in terms of money or figures that are essential to determine the future of a company in terms of expenses. It helps management make decisions based on where to spend the least money or factors like investing in the right place. Therefore, it can be said that controlling the money that is spent is the main objective of cost accounting. In addition, it takes the data from the financial accounting that provides a detailed description of all the accounts. Another factor to consider is that cost accounting helps provide information about the future and does not deal with past events.

Differences in a nutshell

  1. The main function of cost accounting is to help management make decisions based on money, while the central function of financial accounting is to calculate the value of each service that is performed in an organization so that accurate decisions can be made. .
  2. Financial accounting is the first step, while cost accounting is the next phase in any business model.
  3. Cost accounting cannot lead to financial accounting, but financial accounting is the foundation of cost accounting.
  4. Controlling the money that is spent is the main objective of cost accounting, while the main objective of financial accounting is to record all the transactions that take place in the company so that statements can be made.
  5. Actual costs and actual factors are taken into account while conducting a financial accounting procedure, but estimates and guesses are made in a cost accounting process.
  6. Both use quantitative and qualitative data.
  7. Controlling the money that is spent is the main objective of cost accounting, while the main objective of financial accounting is to record all the transactions that take place in the company so that statements can be made.
  8. In financial accounting it is important that all values ​​are up to date and correct to the last limit, while in cost accounting some errors are fine as it is based on estimates.
  9. The data available in cost accounting generally give an idea of ​​the future, while the accessible data in financial accounting helps to know the current situation.
  10. The reports that are produced in cost accounting and financial accounting are useful for multiple entities of the same type.
  11. Financial accounting is done at the end of the year, while cost accounting can be done after a specific period of time specified by the company.
  12. Cost accounting calculates the detailed values ​​relative to money, while financial accounting calculates the broader monetary range.
  13. Financial accounting is carried out with the help of a wide range of material such as journals, accounts, and statements, while cost accounting is carried out with the help of sales, prices, and some other materials.

Final Thought

There are many forms of activities that can be carried out in a business environment and the two terms that have been explained here are similar, people who want to do their business and those who want to explore the commercial side more will find this article really useful and know the differences among them.

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