Difference between Cost and Management Accounting

Cost and Management Accounting Difference; Cost accounting is a branch of accounting that aims at generating information to control operations to maximize profits and the efficiency of the company, that is why it is also termed control accounting. A common question asked around, What is the difference between the Cost Accounting and Management Accounting? Conversely, management accounting is the type of accounting that assists management in planning and decision-making and is thus known as decision accounting. Also learned, Financial and Management Accounting.

Learn, Explain the Difference between Cost and Management Accounting.

The two accounting system plays a significant role, as the users are the internal management of the organization. While cost has a quantitative approach, i.e. it records data that is related to money, management emphasizes both quantitative and qualitative data. Now, let’s understand the difference between cost accounting and management accounting, with the help of the given article.

Definition of Cost Accounting:

They are a method of collecting, recording, classifying, and analyzing the information related to cost. Also, the information provided by it is helpful in the decision-making process of managers. There are three major elements of cost which are material, labor, and overhead. The main aim of cost accounting is to track the cost of production and fixed costs of the company. Also, this information is useful in reducing and controlling various costs. It is very similar to financial accounting, but it is not reported at the end of the financial year.

Definition of Management Accounting:

Management Accounting refers to the preparation of financial and non-financial information for the use of management of the company. It is also termed managerial accounting. Also, the information provided by it helps make policies and strategies, budget, forecasting plans, making comparisons, and evaluating the performance of the management. The reports produced by management accounting are used by the internal management of the organization, and so they are not reported at the end of the financial year.

Comparison of Cost and Management Accounting:

The Basis of Comparison	Cost Accounting	Management Accounting
Meaning	The recording, classifying, and summarizing of cost data of an organization is known as cost accounting.	Also, the accounting in which both financial and non-financial information is provided to managers knows as Management Accounting.
Information Type	Quantitative.	Quantitative and Qualitative.
Objective	Ascertainment of cost of production.	Providing information to managers to set goals and forecast strategies.
Scope	Concerned with ascertainment, allocation, distribution, and accounting aspects of cost.	Impart and effect aspect of costs.
Specific Procedure	Yes	No
Recording	Records past and present data	It gives more stress on the analysis of future projections.
Planning	Short-range planning	Short-range and long-range planning
Interdependency	Can install without management accounting.	Cannot install without cost accounting.

The upcoming discussion will help you to differentiate between cost and management accounting.

The main difference between Cost and Management Accounting:

The following difference below are;

Objective:

The primary objective of Cost Accounting is to ascertain the cost of production as well as to control the same after careful analysis. On the other hand, the primary objective of Management Accounting is to supply the accounting information to the management for taking the proper decision.

Method:

In Cost, accounts are prepared according to predetermined standards and budgets. But in Management reports are submitted to the management after measuring the variance between the actual performances and the budgets. As a result, past errors and defects may rectify and, thereby, efficiency improves.

Accounting System:

The Double Entry System can apply in Cost Account, if necessary, whereas this is not adopting in the case of Management Account.

Accounting Period:

Normally, in Cost, statements of the current year’s activities are to prepare, i.e., importance is not according to future activities while, in Management, primarily future activities are considering.

Management Accounting relates to the whole affair of the concern, the capacity for making profits or losses, and the expectation for the future. To discharge its duties properly, it has to depend on both Financial Accounting and Cost Accounting. Therefore, Management Accounting may regard as the expansion of these two forms of accounting, viz., Financial Account, and Cost Account.

The main points of the difference between Cost and Management Accounting:

• The accounting related to the recording and analyzing of cost data is cost account. Also, the accounting related to producing information which uses by the management of the company is management account.
• Also, Cost provides quantitative information only. On the contrary, Management provides both quantitative and qualitative information.
• Cost is a part of Management as the information uses by the managers for making decisions.
• The primary objective of Cost Accounting is the ascertainment of the cost of producing a product but the main objective of management accounting is to provide information to managers for setting goals and future activity.
• There are specific rules and procedure for preparing cost accounting information while there is no specific rules and procedures in case of management accounting information.
• The scope of Cost Account limits to cost data however the Management Account has a wider area of operation like the tax, budgeting, planning and forecasting, analysis, etc.
• Cost related to the ascertainment, allocation, distribution, and accounts face of cost. On the flip side, management associates with the impact and effect aspect of cost.
• They stress short-range planning, but management accounting focuses on long and short-range planning, for which it uses high-level techniques such as probability structure, sensitivity analysis, etc.
• While management accounting can’t install in the absence of cost accounting; Also, cost accounting has no such requirement, it can install without management accounting.