Branches Of Accounting & Difference between Financial and Cost Accounting

What are the Branches Of Accounting

There are three branches of accounting such as:-

1.Financial Accounting

2.Cost Accounting

3.Management Accounting

What is Financial Accounting?

The accounting which helps to find out the profit and loss of a firm during a year and to know the financial position at the end of the accounting year is called financial Accounting.It’s objective is to provide information to the management body in a systematic manner.

What is Cost Accounting?

The accounting which provides cost information and helps in determination of total cost and in cost control is called cost accounting.

What is Management Accounting?

The accounting which provides various information to take managerial decisions effectively is called Management Accounting.

Difference Between Cost Accounting & Financial Accounting

The following are the points of difference between financial Accounting & Cost Accounting.

i. The main purpose of cost accounting is to reflect the profit made by each product, job, process or department. It will enable the management to eliminate the less profitable product lines and maximise the profit by countating or more profitable units.

But, the main purpose of financial accounting is to reflect the net result of the business as well as the financial position of the organisation as a whole.

ii. Under-cost accounting, keeping accounts are optional or voluntary. If at all maintained it is kept as per the requirement of management. Nowadays keeping cost records has been made compulsory for some industries as per the company act.

But, Under financial accounting the accounts are kept as per the requirement of the company’s act.

iii. Cost accounting gives importance to controlling aspects. It controls material cost, labour cost and other expenses by the help of standard costing and budgetary control etc.

But, Financial accounting gives importance to the recording aspect without giving any importance to control.

iv. Cost accounting provides different types of information to management as it is required.

But, in the case of financial accounting It reports the result of business activities and the financial position of the business at the end of the year.

v.In Cost accounting the cost is broken to its elements in cost accounting.

But, In financial accounting the costs are reported in an aggregate manner.

vi.Cost accounting doesn’t require any type of external credit to the company.

But, Financial accounting requires/ needs external credit to the company.

vii.Cost accounting helps know the total cost & cost per unit.

But, Financial accounting helps to know the financial position and performance of the business organisation.

viii. Cost accounting doesn’t follow the rules and regulations of GAAP.

But, Financial accounting follows the rule and regulation of GAAP.

ix. Cost accounting is both positive and normative science in nature.

But, Financial accounting is only a positive science in nature.

x. Cost accounting helps in fixation of selling price of the product and services.

But, In financial accounting the main object is not to fix the selling price of the product.

xi. Cost accounting deals with both monetary as well as non monetary transactions.

But, In case of financial accounting it deals with the monetary transactions only.

xii. In cost accounting the relative efficiency of workers, plants and machinery etc can be reflected.

But, In financial accounting generally actual facts and figures are used in financial accounting.

xiii. In cost accounting stocks are valued at cost price only.

But, In financial accounting stocks are valued at cost price or market price whichever is less.

xiv.In order to solve any problem related to cost accounting, no such guidance is available. It can be solved only by following the conventions of cost accounts.

But, In financial accounting if any problem arises then it can be solved by making reference to Indian companies act, case decisions and to the rules of sound professional practises.

xv. Cost accounting provides information only to internal parties like the management body of the organisation.

But, Financial accounting provides information or data to both internal and external parties.

xvi. Cost accounting is not such a body regulated.

But, Financial accounting is regulated by company’s act 1956 and income tax act 1961.

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