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Differences between Financial Accounting and Cost Accounting

differences between  financial accounting and cost accounting

Differences between Financial Accounting and Cost Accounting

Basis Financial Accounting Cost Accounting
Purpose
It provides information about the entity in a general way i.e. profitability, assets, liabilities, owners'fund, etc.
It provides information for the management for proper planning, operation, coordination, control, and decision making.
Recording
These are kept in a subjective manner i.e., according to the nature of expenditures.
These are kept in an objective manner i.e., according to the purpose for which costs are incurred.
Items of costs
Items of costs are expressed in totals.
Items of costs are analyzed , classified, apportioned and allocated in order to calculate the costs per unit.
Analysis of profit
These reveal the profit of the whole business
It is only a part of financial accounts. It shows the result of each operation, process, job or product so that unprofitable lines of business can be eliminated.
Control
Emphasis on recording only. No importance to the control aspect.
It provides a detailed system of costs control with the help of standards and budgets.
Periodicity
These are prepared at the end of the accounting year
It is a continuous system of accounting and submits the cost reports to the management weekly or monthly or as and when desired.
Nature of transactions
(a)These relate to commercial transactions of the business .(b) These are concerned with transactions relating to third parties.
(a)These related to manufacturing activities. (b) These are concerned with internal transactions.
Inventory valuation
Inventory is valued at cost or market price whichever is less.
Inventory is valued at cost.
Figures
These deal mainly with actual figures.
Cost accounting deals partly with actual figures and partly with estimates.

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