Difference between COST and FINANCIAL

Accounting

Definition:
Cost Accounting
It is the process of recording, analyzing and classifying of expenditure for the
purpose of product / departmental costing to assist cost control.
Financial Accounting
The branch of accounting concerned with classifying, measuring, and
recording the transactions of a business. At the end of a period, usually a
year but sometimes less, a profit and loss account and a balance sheet are
prepared to show the performance and position of the business. Financial
accounting is primarily concerned with providing a true and Financial
Accounting view of the activities of a business to parties external to it. To
ensure that this is done correctly considerable
Major Differences:
Principal objective
FINANCIAL ACCOUNTING - Stewardship of business for benefit of
shareholders
COST ACCOUNTING – seek to improve economy
Users of accounting information
Cost accounting – provision of information to managers to help them in
decision-making, planning and control.
Financial accounting – provision of information to external users outside the
business.
Report recipients
FINANCIAL ACCOUNTING – External/outsiders namely the shareholders and
government (tax)
COST ACCOUNTING – internal parties like directors and company managers
Outputs
FINANCIAL ACCOUNTING - Summary (usually annual) -profit and loss
account, balance sheet & cash flow statement
COST ACCOUNTING - Detailed monthly and annual management accounts
showing results by product and function ad hoc reports
Regulating framework
FINANCIAL ACCOUNTING - Accounting concepts (as laid down by the
Accounting Standards Board) plus statutory requirements of the Companies
Acts
COST ACCOUNTING – Accounting concepts (as laid down by the Accounting
Standards Board) plus statutory requirements of the Companies Acts
Emphasis on the future
Financial accounting – what has happened in the past
Management accounting – concerned with future and past information.

Legal requirements
Financial accounting - Legal requirement for PLC’s (public limited company).
Cost accounting– optional.
Frequency of reporting
Financial accounting – published annually.
Cost accounting– May be required daily.
Approximations
Financial accounting – must be accurate.
Cost accounting– requires information rapidly with more approximate
information.
Legalization
FINANCIAL ACCOUNTING - Financial accounting for a limited company is a
legal requirement. Subject to audits and other strict regulatory requirements
COST ACCOUNTING - Not made compulsory by law and audits, etc are not
needed.
Application
FINANCIAL ACCOUNTING - Financial accounting is applicable towards the
activities of the whole organization.
COST ACCOUNTING - More segmented to individual department like
purchasing, marketing, etc…

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